Practical FAQ's under GST

Practical FAQ's under GST

 Practical FAQ’s under GST

The Institute of Chartered Accountants of India

(Set up by an Act of Parliament)
New Delhi
© The Institute of Chartered Accountants of India

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First Edition : December, 2020

Committee/Department : GST & Indirect Taxes Committee

E-mail : [email protected]

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 Foreword
The introduction of Goods & Services Tax (GST) in India is one of the most
significant indirect tax reforms since Independence. The reform that took
more than a decade of mutual co-operation, continuous discussion and
intense debate between Central and State Governments about
implementation methodology, was finally implemented with effect from 1 st
July 2017, subsuming almost all indirect taxes at the Central and State
levels. As the journey of GST Implementation progressed in India, the
authorities have been quick to address the various challenges faced by the
Industry and public concerns by issuing a series of notifications,
clarifications, press releases and FAQs, to resolve a wide range of concerns.
The implementation of GST regime has brought in various benefits like
creation of National market by bringing down fiscal barriers amongst the
States and has also mitigated the cascading effect of taxes by allowing
seamless credit of input tax across goods and services. GST has also given
a major boost to the ‘Make in India’ initiative of the Government by making
goods and services produced or provided in India competitive in the national
and international markets.
The Institute of Chartered Accountants of India (ICAI) through its GST &
Indirect Taxes Committee has been playing a vital role in the implementation
of GST in India by providing suggestions to the Government at each stage of
development of GST. Further, the Institute has been playing proactive role
and is a catalyst in knowledge dissemination and creating awareness through
technical publications, newsletters, e-learning and organizing various
programmes, certificate courses, webcasts etc. for the enrichment of all
stakeholders.
I am happy to note that the GST & Indirect Taxes Committee of ICAI has now
taken the initiative to issue a series of Handbooks covering various
procedural aspects of GST and in that series is bringing out this “Practical
FAQ’s under GST” with an objective to provide guidance to the readers on
practical issues faced by them. This publication addresses queries in lucid
language, which would facilitate the readers to easily comprehend the GST
laws, enabling its smooth implementation.
I congratulate CA. Rajendra Kumar P, Chairman, CA. Sushil Kumar Goyal,
Vice-Chairman and other members of GST & Indirect Taxes Committee for
coming out with these Frequently Asked Questions (FAQ’s) and for taking
active steps in providing regular guidance to the members and other
stakeholders at large.
I am sure that members will find this publication very useful in discharging
the statutory functions and responsibilities under the GST laws in an efficient
and effective manner.

Place: New Delhi CA. Atul Kumar Gupta

Date: 4th December, 2020 President, ICAI
 Preface
Goods and Services Tax (GST) was introduced in India from 1 st July, 2017. It
is one of the major tax reforms since Independence in the area of indirect
taxation. It was introduced with the objective to mitigate the cascading effect
of taxes by allowing seamless credit across goods and services, facilitate
free flow of goods and services across India and boosting tax revenue from
better compliance and widening the tax base. A remarkable feature of GST
implementation is that all the States in India came together with the Centre to
form a unique federal body called GST Council, which is entrusted with the
objective of recommending policies and procedural matters in the formation
and implementation of GST legislation. The spirit of co-operative federalism
took deep roots thereby ensuring that large federal countries like India
implement the GST Law.
In order to facilitate understanding of the various compliances under GST,
the GST & Indirect Taxes Committee of ICAI has taken an initiative to
prepare handbooks on procedural aspects like registration, refund, return,
invoice etc. One of the results of such initiative is this Practical FAQ’s
under GST. An attempt has been made here to cover practical aspects
under GST by addressing the queries received in numerous webcasts
organised during the lockdown period covering Concept of Supply, Levy of
GST, Nature and Place of Supply, Input Tax Credit, Time and Value of
Supply, Reverse Charge Mechanism, Interest, Late Fee and Penalty etc. To
make the reading and understanding easier, important examples with
calculation have been included in this publication.
We stand by the Government in our role as “Partner in GST Knowledge
Dissemination” and have always been supporting the Government with our
intellectual resources, expertise and efforts to make GST error-free.
We sincerely thank CA. Atul Kumar Gupta, President and CA. Nihar Niranjan
Jambusaria, Vice-President, ICAI for their encouragement to the initiatives of
the GST & Indirect Taxes Committee. We express our gratitude for the
untiring effort of CA. Aditya Girdharilal Falor, CA. Ajaykumar Narayan
Parnaik, CA. Amey Makarand Dabke, CA. Amish J. Khandhar, CA. Anand
Ratanlalji Nahar, CA. Ankit Kanodia, CA. Arjun Shridhar Phatak,
CA. Atul C. Doshi, CA. Bikash Agarwala , CA. Chaitanya Sunil Vakharia,
CA. Darrshan Sawaiwala, CA. (Dr.) Dilip V. Satbhai, CA. Ganesh Prabhu B,
CA. G Saravanakumar, CA. Hemant Patki, CA. J Balasubramanian,
CA. Jugal Rajkumar Doshi, CA. Kajol Hemraj Rewatkar, CA. Nitesh Jayantilal
Jain, CA. N V S Ramani , CA. Pawankumar Ramavtar Soni, CA. P T Rajeev,
CA. R S Balaji, CA. Saradha H, CA. Saravana Prabhu M,
CA. S. Seetharaman, CA. Shravan B Mali, CA. Unmesh Govind Patwardhan,
CA. Vasudev Joshi K, CA. Vijay Ramgopal Kalani, CA. Vinodh Kothari S,
CA. Vipul Vardhaman Bhandari, CA. Vishal Govindprasad Poddar and
CA. Vishal Jain for sharing their intellectual expertise and CA. Abhishek
Agarwal, CA. Ashu Dalmia, CA. Gajendra Maheshwari, CA. Ganesh Prabhu
B, CA. Gaurav Gupta, CA. Hitesh Jain, CA. H L Madan, CA. J Murali,
CA. N K Bharath Kumar, CA. Navya Malhotra, CA. Pawankumar Ramavtar
Soni, CA. P Harini Sridharan, CA. Purushothaman J, CA. Rajesh Saluja,
CA. Rama Murthy Tejomurtula, CA. Saurabh Singhal, CA. Shaikh Abdul
Samad Ahmad, CA. Shankara Narayanan V, CA. Shubham Khaitan,
CA. Viral M Khandhar, CA. Virender Chauhan, CA.V V Sampath Kumar for
reviewing this publication. We place on record the services and unstinted
support provided by the Secretariat of the Committee.
We record here the dedicated and devoted work done by the former
Secretary of the Committee CA. Sharad Singhal who passed away at a very
young age of 36 on 26 th September 2020. The World of GST in general and
our Committee in particular will miss his intellectual expertise.
The will of the almighty prevails over everything and all of us have to accept
his decision with a bow.
We trust this publication will be of practical use to all the members of the
Institute and other stakeholders. We also welcome suggestions at
[email protected] and request to visit our website https://idtc.icai.org and provide
valuable inputs in our journey to make GST truly a good and simple t ax.

CA. Rajendra Kumar P CA. Sushil Kumar Goyal

Chairman Vice- Chairman
GST & Indirect Taxes Committee GST & Indirect Taxes Committee
Place: New Delhi
Date: 4th December, 2020
 Contents
Chapter 1 – Supply and Levy ...................................................................... 1
Chapter 2 – Composite or Mixed Supply .................................................... 98
Chapter 3 – Reverse Charge Mechanism ................................................ 125
Chapter 4 – Composition Scheme ........................................................... 157
Chapter 5 – Time of Supply ..................................................................... 165
Chapter 6 – Value of Supply.................................................................... 178
Chapter 7 – Input Tax Credit ................................................................... 194
Chapter 8 – Tax Invoice, Credit and Debit Notes ..................................... 284
Chapter 9 – Registration ......................................................................... 287
Chapter 10 – Returns .............................................................................. 312
Chapter 11 – Interest .............................................................................. 327
Chapter 12 – Refunds ............................................................................. 331
Chapter 13 – E-way Bill........................................................................... 339
Chapter 14 – Penalties under GST .......................................................... 341
Chapter 15 – Nature of Supply ................................................................ 347
Chapter 16 – Place of Supply .................................................................. 368
Chapter 17 – Miscellaneous .................................................................... 401
 Chapter 1
Supply and Levy
Supply
Q1. Whether development of land under Joint Development
Agreement (JDA) constitutes a supply under GST?
Ans. Development of Land: Land development is the act of altering the
landscape in many ways from natural or semi-natural state for a
purpose such as agriculture or construction including subdividing it
into plots, typically for the purpose of building homes or commercial
complex.
Land Development in JDA: In the event of Joint Development, an
agreement will be executed between the land owner and the builder.
The rights for development will be given by the land owner and
development will be carried out by the builder. As consideration for
the development undertaken, the builder will be paid in the form of
portion of the said developed land.
In order to determine whether a transaction will constitute a supply
under GST, the said transaction has to satisfy the rudiments of the
definition under Section 7(1) (a) of the Central Goods and Services
Tax Act, 2017 (“the CGST Act”).
An excerpt from the definition is reproduced below:
“7 (1) For the purposes of this Act, the expression "supply"
includes—
(a) all forms of supply of goods or services or both such as
sale, transfer, barter, exchange, licence, rental, lease or
disposal made or agreed to be made for a consideration by
a person in the course or furtherance of business;”
The terms that are relevant for our consideration are “supply of
service”, “made for a consideration” “by a person” and “in the course
or furtherance of business”

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Practical FAQ’s under GST

o “Supply of service”: Anything other than goods is regarded as

service as per the definition of the term ‘service’ under the GST
law. Hence, the activity of development of land will be
considered as service and when it is carried out for other, it
becomes supply of service.
o “Made for a consideration”: Consideration for developing the
land is obtained or normally agreed between the supplier and
recipient as a portion or percentage of the developed land as
per the agreement.
o “By a person” – the definition of the term “person” is exhaustive
and it includes anybody covered within the definition.
o “In the course or furtherance of business” - the activity carried
out is obviously in the course of business or furtherance of
business.
It is clear from the above that the activity of “development of
land” is satisfying the rudiments of the term “supply” under the
CGST Act. Hence, development of land under Joint
Development Agreement will constitute a supply under GST.
Q2. (a) Would the act of Practicing Chartered Accountant who
delivers guest lectures at various Institutes or
organizations fall under the scope of supply?
(b) If yes, would any sum received as honorarium and
reimbursement of local transport expenses at fixed rate will
also have to be added as "consideration"?
Ans. (a) Delivering guest lectures by Practicing Chartered Accountant at
various Institutes or organizations for a consideration
(contractual basis) falls under the scope of supply under
section 7(1) (a) of the CGST Act.
(b) As per section 2(31) of the CGST Act, consideration includes
any payment made or to be made, whether in money or
otherwise or the monetary value of any act or forbearance in
respect of, in response to, or for the inducement of, the supply
of goods or services or both, whether by the recipient or by any
other person.

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 Supply and Levy

The sums received as honorarium and reimbursement of local

transport expenses at a fixed rate shall be treated as
consideration for supply under section 7(1) (a) of the CGST Act.
Q3. What do you understand by the term “in the course of business
and furtherance of business”? What is the tax treatment of the
same under GST?
Ans. In GST the two basic elements are supply and ITC. The definition of
‘supply’ as given in Section 7(1)(a) of the CGST Act includes-
“all forms of supply of goods or services or both such as sale,
transfer, barter, exchange, licence, rental, lease or disposal
made or agreed to be made for a consideration by a person in
the course or furtherance of business”
Hence, “in the course of and in furtherance of business” is the
primary requirement for supply in GST and supply is the primary and
necessary element for levying of GST. The term ‘further’ enables the
entity to supply and receive supplies where the act is towards
achieving the goals of the business.
Further, the condition mandated for availing ITC as mentioned in
Section 16(1) of the CGST Act is:
“Every registered person shall, subject to such conditions and
restrictions as may be prescribed and in the manner specified
in section 49, be entitled to take credit of input tax charged on
any supply of goods or services or both to him which are used
or intended to be used in the course or furtherance of his
business and the said amount shall be credited to the electronic
credit ledger of such person.”
‘In the course or furtherance’ is not defined under GST Act, but is broad
enough to cover any supplies made in connection with the business.
The phrase widens the scope of the definition of ‘Business’ to bring
more activities within its ambit. The phrase “course or furtherance”
further extends to “course or furtherance of business”. Hence, it is
important to understand the meaning of business which is defined in
Section 2(17) of the CGST Act as under:

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Practical FAQ’s under GST

“business” includes —
(a) any trade, commerce, manufacture, profession, vocation,
adventure, wager or any other similar activity, whether or
not it is for a pecuniary benefit;
(b) any activity or transaction in connection with or incidental or
ancillary to sub-clause (a);
(c) any activity or transaction in the nature of sub-clause (a),
whether or not there is volume, frequency, continuity or
regularity of such transaction;
(d) supply or acquisition of goods including capital goods and
services in connection with commencement or closure of
business;
(e) provision by a club, association, society, or any such body
(for a subscription or any other consideration) of the
facilities or benefits to its members;
(f) admission, for a consideration, of persons to any premises;
(g) services supplied by a person as the holder of an office
which has been accepted by him in the course or
furtherance of his trade, profession or vocation;
(h) activities of a race club including by way of totalisator or a
license to book maker or activities of a licensed book maker
in such club; and
(i) any activity or transaction undertaken by the Central
Government, a State Government or any local authority in
which they are engaged as public authorities;
The literal meaning of the said phrase ‘in the course of or
furtherance of’ is ‘during the act of or in continuation of carrying out
such act in future’. Thus, in the course or furtherance of business
means either of following:
- anything done in relation to business, while carrying out
business or
- simply a revenue-generating ordinary activity of that
organisation/concern.

4
 Supply and Levy

Considering the definition of business, the sale of goods or service

even as a vocation is a supply under GST.
However, there is one exception to this ‘course or furtherance of
business’ rule i.e., import of services for a consideration. Import of
services for consideration, even if not in the course -or furtherance
of business are liable to GST. No GST on supply not in the course or
furtherance of business As elaborated above, supplies in the course
or furtherance of business qualify as supply under GST. Hence,
supplies made by an individual in his personal capacity do not come
under the ambit of GST unless they fall within the definition of
business as defined in the Act. It has been clarified vide C.B.E.&C.
Press Release No. 78/2017, dated 13.7.2017 that sale of old gold
jewellery by an individual to a jeweller will not constitute supply as
the same cannot be said to be in the course of furtherance of
business of the individual.
Q4. Whether developmental rights in land given by a land owner to
a developer (in case of an agreement for area sharing or
revenue sharing between the two) are to be considered as
supply by the land owner in the course or furtherance of
business?
Ans. The moot question is whether the transfer of development rights
(TDR) being a “benefit arising out of land” can be deemed to be a
supply under GST based on the judicial precedents given under the
erstwhile indirect tax regime. However, Notification No. 4/2018
Central Tax (Rate) dated 25.01.2018 was issued notifying the
applicability of GST on TDR. This notification deemed that the
transfer of TDR will be a supply and liable under GST. Thus, the
transfer of development rights by landowner to developer is treated
as supply in which development rights are transferred in return for
consideration that involves in kind, wholly or partly, in the form of
construction service of complex, building or civil structure.
Developmental rights in land given by a land owner to a promoter (in
case of an agreement for area sharing or revenue sharing between
the two) are to be considered as supply by the land owner in the
course or furtherance of business. Further, Notification No. 05/2019-
Central Tax (Rate) dated 29.03.2019 ["NN 5/2019-CTR"] was
issued notifying that the services supplied by any person by way of

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Practical FAQ’s under GST

transfer of development rights or floor space index (FSI) (including

additional FSI) for construction of a project by a promoter would be
chargeable to GST under RCM as per section 9(3) of the CGST Act,
w.e.f. 1st April, 2020.
Q5. Group insurance and LIC premium collected from employees
salary by employer contains GST. The amount along with GST
is remitted to the concerned insurance company. Is this supply
for employer?
Ans. ⚫ In order to constitute a ‘supply’, the following elements are
required to be satisfied:
(i) there should be supply of “goods” and / or services”;
(ii) supply is for a “consideration”;
(iii) supply is made “in the course or furtherance of business”:
• From the above, it is clear that any activity done against
consideration is treated as supply; however, such an activity
must be in the course of business or for the furtherance of
business.
• The term “in the course of business” or “furtherance of
business” is not defined under the CGST Act. However, the term
“business” has been defined in section 2(17) of the CGST Act
[Please refer Q3 for term “business”]. The term “business”
broadly means any trade, commerce, manufacture, profession,
vocation, adventure, wager or any other similar activity whether
or not it is for pecuniary benefits. Any activity ancillary or
incidental to these activities is also covered as business. It has
also been provided that any activity or transaction falling in
above categories would be business whether or not there is
volume, frequency, continuity or regularity in transactions.
• In the instant case, Group insurance and LIC premium are
collected from employees by the employer who is not engaged
in the business of providing insurance services. The service of
insurance is actually provided by the insurance company for
which the insurance company is charging GST. The employer is
just paying the insurance premium amount to the insurance
company and recovering premium amount from the employees.

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 Supply and Levy

• Thus, it is clear that the employer is not in the business of

providing insurance services. Therefore, activity of recovery of
insurance premium cannot be treated as an activity done in the
course of business or for the furtherance of business.
• Accordingly. based on the reading of sections 7 and 2(17) of the
CGST Act, providing insurance service and recovery of premium
amount is not in the course or furtherance of business and
hence cannot be considered as “supply of service”.
Q6. If a person gives his property on rent for commercial purpose
and the property has been purchased for investment, whether
the same shall be considered as supply being in the course of
business and hence taxable?
Ans. There are 3 questions in the above query:
1. Whether the above transaction shall be considered as supply
being in the course of business?
2. If yes, whether the same is taxable?
3. Will it make any difference if the commercial property is shown
as investment and not as business asset in the books of
accounts?
Section 7 of the CGST Act, outlines the scope of ‘supply’. The
expression ‘supply’ includes – all forms of supply of goods or
services or both such as sale, transfer, barter, exchange, licence,
rental, lease or disposal made or agreed to be made for a
consideration by a person in the course or furtherance of business.
Renting of immovable property is covered in the first part of the
definition. Further such transaction should be in the course or
furtherance of business to be treated as supply.
To decide whether a transaction is in the course or furtherance of
business, we have to refer to definition of the term ‘business’ which
is given in Section 2(17) of the CGST Act.
The definition of ‘business’ starts with the words "it includes". While
interpreting the words "it includes" whatever is clearly mentioned as
business shall be considered, and any activity similar in nature even
though not mentioned will be covered by the word "it includes". The

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Practical FAQ’s under GST

definition further covers any trade, commerce, manufacture,

profession, vocation, adventure, wager or any other similar activity.
The definition of ‘business’ specifically mentions “similar activities”.
Hence it appears that intention of legislature is that any activity
which generates revenue/income is business activity.
Therefore, the above transaction is supply in the course of
business.
Now the second question is, whether the same is taxable. There is
no specific exemption to renting of commercial premises and hence
the same will be taxable.
Coming to the last question, whether it will make any difference by
giving different accounting treatment? Since the activity is supply as
per provisions of Section 7 of the CGST Act, it will not make any
difference whether the commercial premises is shown as business
asset or investment in the books of accounts.
In the service tax regime, renting of immovable property was
taxable. GST is continuation of earlier laws in a consolidated form.
Q7. Is there a supply between member of an AOP and the AOP?
Ans. As per Section 2(17)(e) of the CGST Act, the term “business”
includes provision by a club, association, society, or any such body
(for a subscription or any other consideration) of the facilities or
benefits to its members.
As per Entry No. 7 of Schedule II of the CGST Act, supply of goods
by any unincorporated association or body of persons to a member
thereof for cash, deferred payment or other valuable consideration
shall be treated as supply of goods.
Circular No. 35/9/2018 -GST dated 5.03.2018, provides that supply
of services by an unincorporated association or body of persons
(AOP) to a member thereof for cash, deferred payment or other
valuable consideration, shall be treated as supply of services.
On the basis of the above, supply of goods / services between AOP
and its members would be treated as supply and liable to GST.

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 Supply and Levy

Q8. Whether transfer of business assets including stock from

proprietary concern which is converted into private limited
company/ partnership firm constitutes supply under GST? Will
it have any effect if the proprietary is/ is not a partner in the
new firm?
Ans. The definition of ‘business’ is given in Section 2(17) of the CGST
Act. Sub-clause (d) of Section 2(17) of the CGST Act provides that-
“business includes —
(a) ………………………….
…...…………….
(d) supply or acquisition of goods including capital goods and
services in connection with commencement or closure of
business;
………”
Thus, transfer of business assets to another entity due to closure of
business will be treated as a supply. In the instant case, when the
proprietary concern is converted into a private limited company/firm,
the proprietary concern ceases to exist and the transfer of business
assets will be treated as a supply. The transfer of all business
assets including stock to the newly formed entity, by virtue of
Schedule II of the CGST Act, is deemed to be treated as a supply of
services even though the assets (goods) are being transferred.
However, if the business is transferred as a going concern (i.e.) lock,
stock and barrel] and the business of the proprietary concern is
carried out by the new entity, then such transfer of business as a
going concern is exempt from tax vide Sl.No. 2 in Notification No.
12/2017-Central Tax (Rate) dated 28.06.2017 [“NN 12/2017-CTR”]/
Notification No. 9/2017- Integrated Tax (Rate) dated 28.06.2017
[“NN 9/2017-ITR”], which is reproduced as under:

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Practical FAQ’s under GST

Sl. Chapter, Description of Rate Condition

No. Section, Services (per
Heading, cent.)
Group or
Service Code
(Tariff)
(1) (2) (3) (4) (5)
Services by way of
transfer of a going
2 Chapter 99 concern, as a whole or Nil Nil
an independent part
thereof.

The point to be noted is that the business of the ceased entity

should be carried on as a going concern by the new entity. It is
irrelevant if the proprietor is part of the new entity or not.
Q9. Whether distribution of Head Office expenses to Branch Office
would constitute supply?
Ans. ⚫ The concept of distinct persons has been introduced in GST. In
terms of Section 25(5) of CGST Act, Head Office and Branch
Office shall be treated as distinct entities and any service
provided by Head Office to Branch Office shall be regarded as
supply under GST law and shall attract GST.
• However, mere allocation or distribution of costs/expenses is
different from supply of service from Head Office to Branch
Office.
• Therefore, cost allocation/distribution activity per se shall not be
construed as supply of service from Head Office to Branch Office
and GST shall not be leviable on such cost allocation, unless
there exists an element of supply.
• But in all those cases where a Head Office is giving any kind of
service(s) to its Branches (which would be a taxable supply),
then certainly these expenses would play an important role
while calculating the value of supply of services under cross
charge.

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 Supply and Levy

Q10. Can subsidy received under Credit Linked Subsidy Scheme

(CLSS) be treated as supply under GST?
Ans. ⚫ The Pradhan Mantri Awas Yojana - Credit Linked Subsidy
Scheme was implemented to help the urban poor
population by increasing the institutional credit flow to
meet their housing needs.
• Section 7 of the CGST Act provides that the expression “supply”
includes all forms of supply of goods or services or both such as
sale, transfer, barter, exchange, licence, rental, lease or
disposal made or agreed to be made for a consideration by a
person in the course or furtherance of business.
• In terms of Section 2(31) of the CGST Act, any subsidy given by
the Central Government or a State Government shall not be
included in consideration.
Further, as per Section 15 of the CGST Act, subsidies provided
by the Central Government and State Governments shall not be
included in the value of supply.
• In view of the above, subsidy received under CLSS from Central
Government shall not fall under the scope of supply.
Q11. What do you understand by – exempted supply/nil rated supply,
non-taxable supply / non-GST supply, no supply and zero-rated
supply? Explain with examples.
Ans. Exempt Supplies / Nil rated supplies
• As per Section 2(47) of the CGST Act: “exempt supply” means
supply of any goods or services or both which attracts nil rate of
tax or which may be wholly exempt from tax under section 11, or
under section 6 of the Integrated Goods and Services Tax Act,
and includes non-taxable supply;
• Exempt supplies mean-
─ Supplies which attract nil rate of tax as per the tariff itself
─ Supplies which are exempt under Section 11 of the CGST
Act or Section 6 of the Integrated Goods and Services Tax
Act, 2017 (“the IGST Act”). These sections grant power to

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Practical FAQ’s under GST

the Government to exempt generally, either absolutely or

subject to such conditions as may be specified therein,
supply of goods or services or both of any specified
description from the whole or any part of the tax leviable
thereon with effect from such date as may be specified in
such notification and
─ Includes non-taxable supplies.
Non-Taxable Supplies / Non-GST Supplies
• As per Section 2(78) of the CGST Act: “non-taxable supply”
means a supply of goods or services or both which is not
leviable to tax under this Act or under the Integrated Goods and
Services Tax Act;
• Supplies which are excluded from the charging section (i.e.)
Section 9(1) and section 9(2) of the CGST Act, are to be
considered as non-taxable supplies as they are not leviable to
tax under this the said Act. Supply of alcoholic liquor for human
consumption, petroleum crude, high speed diesel, motor spirit
(commonly known as petrol), natural gas and aviation turbine
fuel as stipulated in Section 9(2) of CGST Act have been
excluded from the scope of the levy and thus, will be considered
as non-taxable supplies.
No Supply
• A transaction or activity must fall under the ambit of ‘supply’ as
defined under the GST law, to qualify as a non-taxable supply
under the GST law. Supplies which are not leviable to tax are
known as non-taxable supplies.
• Therefore, transactions specified in Schedule III which are
treated neither as supply of goods nor as supply of services,
would be considered as “no supply” for the purpose of GST law
and qualify as non-taxable supplies for the purposes of
calculating the threshold limit for registration.
Zero-rated supply
• As per Section 2(23) of the IGST Act, “zero-rated supply” shall
have the meaning assigned to it in section 16 of the IGST Act.

12
 Supply and Levy

• Under Section 16(1) of the IGST Act, following are treated as

zero-rated supplies:
1. Export of goods or services or both
2. Supply of goods or services to Special Economic Zone
developer or a Special Economic Zone unit.
• Zero-rated supply does not mean that the goods or services are
nil rated or are taxed at 0 % tax. In respect of such zero-rated
supplies, there are options to neutralize the incidence of GST,
by allowing ITC on inward supplies to such suppliers and by
allowing refund of unutilised credits.
Examples
• A2Z Beverages India Private Limited is engaged in the
following businesses ::
o Supply of alcohol for human consumption – Non-taxable
supplies as they are currently outside the purview of GST.
o Supply of non-alcoholic toddy – Exempt supply by virtue of
Exemption Notification.
o Supply of concentrated juice essence from a company in
Spain to a company in Germany – is not a supply. No
supply by virtue of Schedule III to the CGST Act.
o Supply of sweetened aerated drinks from its factory at
Chennai to a customer in Indonesia – Zero rated supplies
(Exports).
Q12. What is the concept of deemed supply under GST law?
Ans. Section 7 of the CGST Act prescribes that ‘supply’ includes all forms
of supply of goods and /or services for consideration. However,
there are certain activities which are to be treated as ‘supply’ under
GST even though they are without consideration. Such activities are
deemed to be ‘supply’ under GST law i.e. even though there is no
consideration payable in respect of such supply, the GST law treats
them as deemed supply. Such activities have been enumerated in
Schedule I to the CGST Act. The following are the list of such
activities:

13
Practical FAQ’s under GST

1. Permanent transfer or disposal of business assets where input

tax credit has been availed on such assets.
2. Supply of goods or services or both between related persons or
between distinct persons as specified in section 25, when made
in the course or furtherance of business:
Provided that gifts not exceeding fifty thousand rupees in value
in a financial year by an employer to an employee shall not be
treated as supply of goods or services or both.
3. Supply of goods —
(a) by a principal to his agent where the agent undertakes to
supply such goods on behalf of the principal; or
(b) by an agent to his principal where the agent undertakes to
receive such goods on behalf of the principal.
4. Import of services by a person from a related person or from
any of his other establishments outside India, in the course or
furtherance of business.
Q13. Whether permanent transfer of business asset, where no ITC is
availed, if made without consideration is liable to tax under GST
law?
Ans. Entry No. 1 of Schedule I of the GST law (the CGST Act) treats a
permanent transfer or disposal of business assets where ITC
has been availed, as a deemed supply, even if it is without
consideration.
In the present case, since no ITC is availed, the permanent transfer
of business asset without consideration may not be treated as
supply under GST and therefore, no GST shall be leviable.
Q14. A Company gives Diwali gifts to its employees, where the
overall cost is in lakhs of rupees but individual employee gift
cost does not exceed 50,000/-. Whether it will constitute supply
in terms of Entry No. 2 of Schedule I of Section 7 of the CGST
Act?
Ans. ⚫ Schedule I to the CGST Act, spells out the activities which shall
be treated as supply even without consideration.

14
 Supply and Levy

• Entry No. 2 of the Schedule I provides that –

“Supply of goods or services or both between related
persons or between distinct persons as specified in
section 25, when made in the course or furtherance of
business:
Provided that gifts not exceeding fifty thousand rupees in
value in a financial year by an employer to an employee
shall not be treated as supply of goods or services or both.”
• The Government also vide a Press Release [C.B.E. & C. Press
Release No. 73/2017, dated 10.7.2017] clarified that gifts up to
a value of Rs 50,000/- per year by an employer to his employee
are outside the ambit of GST.
• Therefore, the threshold limit of ` 50,000 shall be applicable on
per employee basis in a financial year.
• In view of the above, as the value of the gift to an individual
employee is less than ` 50,000/- in the instant case, GST shall
not be applicable.
Q15. A company is in the business of manufacturing and supplying of
goods from its factory in the State of Andhra Pradesh (AP). Its
corporate office is located in the State of Tamil Nadu (TN) and the
orders & procurement processes are managed from TN. Will the
services provided by the different arms of the company from TN to
AP be considered as supply of service in the context of Entry No.2
of Schedule I of the CGST Act?
Ans. Yes, the services provided by different arms of the company from
TN (corporate office) to AP (manufacturing unit) with or without
consideration will be treated as supply as per Entry No. 2 of
Schedule I (Activities to be treated as supply even if made without
consideration) of the CGST Act. The value of such supply shall be
determined as per section 15 of the CGST Act read with the
applicable the Central Goods and Services Tax Rules, 2017 (“the
CGST Rules”).
Q16. Whether the conversion of stock in trade into capital asset
constitutes supply under GST law?
Ans. The concept of conversion of stock in trade to capital asset is

15
Practical FAQ’s under GST

prevalent in the Income Tax Law. But similar concept is not found or
dealt with in the GST Law.
However, where goods forming part of the assets of a business are
transferred or disposed of by or under the directions of the person
carrying on the business so as no longer to form part of those
assets, such transfer or disposal is deemed as supply of goods by
the person.
As per Entry No. 1 of Schedule I of the CGST Act, permanent
transfer or disposal of business assets where ITC has been availed
on such assets is an activities to be treated as supply even if made
without consideration.
Further, Entry No. 4(b) of Schedule II of the CGST Act states that
where, by or under the direction of a person carrying on a business,
goods held or used for the purposes of the business are put to any
private use or are used, or made available to any person for use, for
any purpose other than a purpose of the business, the usage or
making available of such goods is a supply of services.
Hence, conversion of stock in trade into capital asset, used for other
than business purposes or used for privately, could be treated as
supply of service and accordingly GST would be applicable.
Q17. Is GST leviable on disposal of business assets where ITC has
not been availed (VAT credit availed)? Will this transaction still
come under the ambit of Entry No.1 of Schedule I?
Ans. GST is applicable on the disposal of business assets as it is covered
within the definition of supply given in section 7(1) of the CGST Act.
If disposal of business asset is for a consideration, then the GST will
be applicable on such consideration.
If disposal of business asset is without consideration, then
Schedule I applicability needs to be checked.
▪ If ITC has been availed on such business asset, then it will be
treated as a supply and valuation of such disposal has to be
done in accordance with section 15 read with related Rules.
▪ If no ITC has been availed, then in the absence of
consideration, the disposal will not be treated as a supply and
thus no tax will be attracted.

16
 Supply and Levy

In the instant case, VAT credit that had been availed on the
business asset would have been transitioned into the GST regime
by filing Form GST TRAN-1. This credit availed through Form GST
TRAN-1 is available for set off against the GST liability. Hence, it will
be deemed that the ITC has been availed on such business assets
and if there is no consideration charged for the disposal of business
assets, then Schedule I is attracted. However, it is possible that a
different view may be taken in this case, due to interpretation of the
provision. Hence, before taking a decision all pros and cons may be
ascertained by the person concerned.
Q18. Whether ITC is required to be reversed in case of free samples
under section 17 (5) even on those goods which have been
exported under LUT or it is a taxable supply as per Schedule I,
i.e. permanent disposal of a business asset, which does not
require ITC reversal but to pay tax on outward supply?
Ans. The Central Board of Indirect Taxes and Customs (“CBIC”) vide
Circular No. 92/11/2019 – GST dated 07.03.2019 has inter alia,
clarified the following:
“A. Free samples and gifts:
i. It is a common practice among certain sections of trade and
industry, such as, pharmaceutical companies which often
provide drug samples to their stockists, dealers, medical
practitioners, etc. without charging any consideration. As per
sub clause (a) of sub-section (1) of section 7 of the said Act, the
expression “supply” includes all forms of supply of goods or
services or both such as sale, transfer, barter, exchange,
licence, rental, lease or disposal made or agreed to be made for
a consideration by a person in the course or furtherance of
business. Therefore, the goods or services or both which are
supplied free of cost (without any consideration) shall not be
treated as “supply‟ under GST (except in case of activities
mentioned in Schedule I of the said Act). Accordingly, it is
clarified that samples which are supplied free of cost, without
any consideration, do not qualify as “supply‟ under GST, except
where the activity falls within the ambit of Schedule I of the said
Act.

17
Practical FAQ’s under GST

ii. Further, clause (h) of sub-section (5) of section 17 of the said

Act provides that ITC shall not be available in respect of goods
lost, stolen, destroyed, written off or disposed of by way of gift
or free samples. Thus, it is clarified that input tax credit shall not
be available to the supplier on the inputs, input services and
capital goods to the extent they are used in relation to the gifts
or free samples distributed without any consideration. However,
where the activity of distribution of gifts or free samples falls
within the scope of “supply‟ on account of the provisions
contained in Schedule I of the said Act, the supplier would be
eligible to avail of the ITC.”
From the above clarification, we can infer that the activity does not
amount to supply in the absence of consideration. However, the
items specified in Schedule I are an exemption to the above-given
rule. The queriest justifies that the free samples is a part of
Schedule I of the CGST Act and hence, taxable as outward supply.
The entry is reproduced below:
1. Permanent transfer or disposal of business assets where input
tax credit has been availed on such assets.
Let us determine whether the sample sales are covered under
Schedule I or Section 17 (5).
The term ‘business asset’ has not been defined under the GST law.
It is a settled principle that words must be given their plain, ordinary
and literal meaning unless a statute defines it otherwise.
Accordingly, the term ‘business asset’ is commonly understood as
assets in the company’s balance sheet. Thus, as per the said entry
the goods being business assets, disposal as free sample without
making any distinction between related party and unrelated party, is
a supply.
When the activity is a supply, the registered person has to raise a
tax invoice and in the given scenario is also required to issue such
documents. However, with respect to the value on which the tax has
to be charged, one has to invoke the valuation rules, since the
transaction does not have consideration.
On examination of the Rules it appears that no specific rule has
been framed for the given transaction, and accordingly the

18
 Supply and Levy

registered person has either to pay the tax as per rule 30 say, cost
plus 10% or rule 31 which is to determined using reasonable means
consistent with the principles and the general provisions of
section 15 and the provisions of the Act.
Therefore, a view can be taken that where GST is charged on the
free samples, ITC reversal is not required.
CBIC in one of the FAQs had replied that the free samples are
taxable and invoice has to be raised; when samples are cleared
along with other goods. The relevant FAQ is reproduced below:
“How the Invoicing should be done for free goods given along
with sale so that corresponding input tax credit is not required to
be reversed for products under scheme?
Invoice Value would include value of all goods including those
supplied free. In such cases, ITC is not required to be reversed.”
The FAQ is applicable for the cases where the goods are cleared as
either composite or mixed supply.
In a situation, where the free sample alone has been cleared, then
the above FAQ will not apply and CBIC has also replied in another
FAQ that such transaction is subject to reversal of ITC as per
section 17 (5) (h) of the CGST Act. The FAQ is given below:
“What are the requirements for clearance of physician samples
distributed free of cost?
In case of clearance of physician samples distributed free of
cost, ITC availed on the said samples has to be reversed in
view of the provisions under section 17(5)(h) of the CGST Act,
2017. No tax is payable on clearance of physician samples
distributed free of cost as the value of supply is zero and no
credit has been availed.”
Hence the supply of goods as free samples will not qualify as
supply and ITC should be reversed under section 17 (5) (h) of
the CGST Act, even if the transaction qualifies the term “export
of goods” in the IGST Act. [Refer section 16 (2) of the IGST Act].
Q19. If Mr. A, a Chartered Accountant is filing a IT return for his
brother Mr. B, whether it constitutes supply? If yes, what is the
value of such supply?

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Practical FAQ’s under GST

Ans. ⚫ In terms of Clause (a) (viii) of Explanation to Section 15 of

CGST Act, both CA. A and his brother Mr. B shall be deemed to
be “related persons” as they are members of the same family.
⚫ Therefore, valuation of such supply shall be governed as per
Rule 28 of the CGST Rules, which provides for the valuation of
the supply of goods or services or both where the supplier and
recipient are related. The relevant extract is as follows:
(a) be the open market value of such supply;
(b) if the open market value is not available, be the value of
supply of goods or services of like kind and quality;
(c) if the value is not determinable under clause (a) or (b), be
the value as determined by the application of rule 30 or rule
31, in that order”
⚫ Further, as per Entry No.2 of Schedule I to CGST Act, Supply of
goods or services or both between related persons, when made
in the course or furtherance of business shall be treated as
supply, even if made without consideration.
⚫ However, filing of IT return of a brother is out of natural love and
affection, rather than a business transaction and may not be
considered as a supply under Schedule I, as the same would
not be made in the course or furtherance of business.
Q20. A Ltd. has given ATM machines to various banks on finance
lease basis. Installation of these machines is done by third
parties to banks. Banks have the practice of shifting the ATM
machines from one place to another place. While shifting, it
may so happen that the machines are shifted from one State to
another State. Whether such transfer constitutes a supply?
Who is required to prepare the documents like invoice, e-way
bill etc. whether A Ltd. or the banks?
Ans. A Ltd. has primarily entered leasing transactions with the banks. In
this context the following entries of Schedule II of the CGST Act are
worth reading:
• any transfer of right in goods or of undivided share in goods
without the transfer of title thereof, is a supply of services;

20
 Supply and Levy

• any transfer of the title in goods is a supply of goods;

• any transfer of title in goods under an agreement which
stipulates that property in goods shall pass at a future date upon
payment of full consideration as agreed, is a supply of goods.”
• A finance lease is a lease that transfers substantially all risks
and rewards incidental to ownership of an asset. If the title to
the goods is transferred as per the agreement at the future date
then, it would be regarded as goods. If title to the goods is not
transferred and mere right in goods without transfer of title
thereof is transferred then, it would be a service.
• In view of the above discussion, the answer to the question is as
follows:
o In case title to goods from the leasing company to the bank is
transferred in the given example, then entire ownership and
control on the machines are transferred. When banks transfer
these machines from one State to another State branch
permanently i.e. assets are shifted from transferor branch
balance sheet to transferee branch balance sheet, then it
would amount to deemed supply of goods by the bank branch /
HO of one State to branch in other State as per Schedule I of
the CGST Act. The transferor branch is liable to raise tax
invoice and charge GST in line with Rule 28 of the CGST
Rules, raise e-way bill etc., However, if assets are not shifted
from the balance sheet and machines are transferred
temporarily, then it would amount to deemed supply of service
by the branch of one State to a Branch in the other State as
per Schedule I of the CGST Act. Transferor branch is required
to raise delivery challan in terms of Rule 55(1) (c) of the CGST
Rules “transportation of goods for reasons other than by way
of supply” and e-way bill as per the provisions of Rule 138.
o In case title to goods from the leasing company to the bank
is not transferred and merely the right to use is transferred,
then ownership lies with leasing company. When bank
transfers these machines from one State to another State,
this would naturally be a case of temporary transfer without
transfer of title to machines. In this case, the transferor

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Practical FAQ’s under GST

branch is required to raise delivery challan in terms of

Rule 55(1)(c) of the CGST Rules, “transportation of goods
for reasons other than by way of supply”, and e-way bill in
terms of Rule 138. A Ltd. is not required to raise the
documents because the person causing movement of
goods is the bank and not A ltd.
Q21. Whether sale of business without any transfer of assets
constitutes supply under GST?
Ans. Yes, as per Section 2(17)(d) of the CGST Act, “business” includes
supply or acquisition of goods including capital goods and services
in connection with commencement or closure of business.
Therefore, all the assets in the sale of business would be regarded
as ‘supply’. Also Entry No. 4 of Schedule II of the CGST Act
mentions this type of transfers as supply of goods. However, it may
be noted that services by way of transfer of a going concern as a
whole or an independent part of it will not be liable to be taxed in
view of the exemption notification issued in this regard. vide Sl.No. 2
in NN 12/2017-CTR/ NN 9/2017-ITR.
Q22. (A) Whether sale of non-business assets like Jewellery &
ornaments, personal motor vehicle, immovable properties
etc., by a person is to be considered as supply?
(B) Would the threshold limit for registration under section 22
of the CGST Act, be applicable for such sales?
Ans. (A) Sale of jewellery: As per the press release by CBIC dated 13 July
2017, even though the sale of old gold by an individual is for a
consideration, it cannot be said to be in the course or
furtherance of his business (as selling old gold jewellery is not
the business of the said person), and hence does not qualify to
be a supply per se. Accordingly the sale of old jewellery by a
person to a jeweller will not attract GST.
However, it is pertinent to note that clause (a) of the Entry No.4
to Schedule II of the CGST Act, classified the following
transaction as supply of goods:
(a) where goods forming part of the assets of a business are
transferred or disposed of by or under the directions of the

22
 Supply and Levy

person carrying on the business so as no longer to form

part of those assets, such transfer or disposal is a supply of
goods by the person;
The transaction will not be qualified as “supply” only when he
satisfies that the jewelry is a personal effect and form part of his
individual balance sheet; which can be distinguished from his
business financial statement.
Sale of motor vehicle: The above discussion holds good in case
of sale of personal motor vehicle also.
Sale of land: Besides the above discussion for distinguishing
the business and personal assets; one should also consider
Entry No. 5 of Schedule III of the CGST Act, where sale of land
is treated neither as a supply of goods nor supply of services.
(B) Threshold limit for registration under section 22 of the CGST
Act, shall not include the value of sale of non-business assets
(like jewellery & ornaments, personal motor vehicles and
immovable properties) provided the registered person is able to
prove that the sale of assets are non-business in nature. The
above said transaction is neither supply of goods nor service, to
be considered as “no supply”. As per section 2(6) of the CGST
Act, aggregate turnover does not include no supply; however
taxable supply and exempted supply, including non-taxable
supply will be included in determining the threshold for
registration under GST.
Q23. A company is registered with the objective of doing business in
real estate. The company holds a flat which is under
construction. The builder has delayed the completion of
building and therefore the company has cancelled the flat. It
has received compensation for delay in completion of building
on cancellation of flat. Whether compensation received is
supply and taxable under GST?
Ans. As per the Section 7(1A) of the CGST Act read with Entry No. 5(e) of
Schedule II thereof, agreeing to the obligation to refrain from an act,
or to tolerate an act or a situation, or to do an act, shall be treated as
supply of service.

23
Practical FAQ’s under GST

In the instant case, the company has received compensation on

cancellation of flat for delay in completion of the building by the
builder which can be construed as a consideration for tolerating an
act of delay by the builder. Therefore, the same may be construed
as supply of service and hence taxable.
We can also refer the decision in Service Tax Appeal No. 76639 of
2018-[DB] dated 25/10/2019, Amit Metaliks Limited v.
Commissioner of Central Goods & Service Tax (CESTAT
Kolkata).
Q24. Whether a works contract for installing solar plant, where land
is purchased by supplier, constitutes supply under GST?
Ans. ⚫ As per Section 2 (119) of the CGST Act,
“works contract” means a contract for building, construction,
fabrication, completion, erection, installation, fitting out,
improvement, modification, repair, maintenance, renovation,
alteration or commissioning of any immovable property
wherein transfer of property in goods (whether as goods or
in some other form) is involved in the execution of such
contract.
• Schedule III to the CGST Act stipulates activities which shall be
treated as neither supply of goods nor supply of services – in
other words, falling outside the scope of GST.
• Entry No. 5 of Schedule III which provides that, sale of land is
not a supply is reproduced below:
“5. Sale of land and, subject to clause (b) of paragraph 5
of Schedule II, sale of building.”
• In view of the above, if a separate agreement is entered into
towards sale of land, then the same shall be outside the purview
of GST. Otherwise, the same could be included in the works
contract of installation of solar plant.
However, if such supply is treated as composite supply as defined
under section 2(30) of the CGST Act, then it will be taxable at the
rate applicable to the principal supply.

24
 Supply and Levy

Q25. Will sale of land by land owner after development of garden and
small amenities (not construction activities) be covered under
GST? What if, the sale commenced - (i) during development (ii)
after completion of development.
Ans. Schedule III of the CGST Act, which enumerates the list of activities
or transactions which shall be treated neither as a supply of goods
nor a supply of services, provides at Entry No.5: “Sale of land and,
subject to clause (b) of paragraph 5 of Schedule II, sale of building .”
Accordingly, sale of land is neither supply of goods nor services.
Development of amenities, garden on the land is mere value
addition to land and the land continues to be land after the
development.
Q26. Whether salary of ` 50 lakhs a year and share of profit of
` 75 lakhs received by the working partner of a partnership firm
constitute a supply and exigible to GST?
Ans. A Partnership firm is governed by the provisions of the Indian
Partnership Act, 1932 and the partnership firm has no separate legal
entity distinct from its partners. The liability of the partners of the
firm is joint and several. Accordingly, the remuneration and profits
are distributed among the partners as per the partnership deed.
As per section 7 (1) (a) of the CGST Act, the scope of ‘supply’
includes “all forms of supply of goods or services or both such as
sale, transfer, barter, exchange, licence, rental, lease or disposal
made or agreed to be made for a consideration by a person in the
course or furtherance of business”. Hence, it is relevant to
understand that the activity will qualify as “supply” only if it is in
relation to goods or services.
Entry No. 6 of Schedule III of the CGST Act enumerates ‘actionable
claims’ as an activity which is neither supply of goods, nor services.
Further, sub-section (1) of section 2 of the CGST Act defines the
term “actionable claim” which refers to section 3 of the Transfer of
Property Act, 1882.
Accordingly, as per section 3 of the Transfer of Property Act, 1882,
actionable claims means a claim to any debt, other than a debt
secured by mortgage of immovable property or by hypothecation or

25
Practical FAQ’s under GST

pledge of movable property or to any beneficial interest in movable

property not in the possession, either actual or constructive, of the
claimant, which, the Civil Courts recognize as affording grounds for
relief, whether such debt or beneficial interest be existent, accruing,
conditional or contingent.
In the instant case, there is an obligation on the part of the partners
of the firm to pay such amounts as per the partnership deed signed
by them. Therefore, each partner has a claim to the specified
amounts in the profits earned by the firm. Each partner’s claim is
contingent on the happening of such event. Thus, it can be inferred
that the profit earned by the partner is an 'actionable claim'.
Therefore, the share of profit, being an appropriation of profits will
not be liable to GST. Similar view has also been taken in the FAQs
published by the CBIC on their website cbic-gst.gov.in as mentioned
below:
“79. Salary by partnership firm to Partners as per Income-tax
Act liable to GST?
Answer: Salary will not be liable to GST.
92. Salary by partnership firm to partners as per Income-tax Act
liable to GST? Partners are not employees of the firm.
Answer: Salary will not be leviable of GST.”
Partners’ salary and share of profit do not constitute a “supply” as it
is an appropriation of profits by a partnership firm, which does not
have a separate legal entity.
Besides the above, in Union of India v. Sarada Mills [(1972) 2 SCC
877, 880], the Apex Court has held that, “an actionable claim would
include a right to recover insurance money or a partner's right to sue
for an account of a dissolved partnership or the right to claim the
benefit of a contract not coupled with any liability”.
Q27. Whether royalty on mining paid by one Government Department
to another Government unit shall fall under ‘supply’ and who is
liable to pay GST?
Ans. Generally, royalty on mining is paid in respect of mining lease
providing the exclusive right to mining. Royalty is paid to the lessor

26
 Supply and Levy

as a consideration towards the various benefits granted to the

lessee. Royalty is collected by the Government from the business
entities for rights given to them to extract mineral and is usually paid
based on the quantum of minerals extracted or exploited.
Under mining lease, there is a supply of licensing services for right
to use minerals including exploration and evaluation by the
Government and the consideration towards such supply is paid in
the form of royalty by the business entities.
Since, supply of services by the Government to a business entity
located in the taxable territory, are covered under Sl No. 5 of
Notification No.13/2017-Central Tax (Rate), dated 28.06.2017 [“NN
13/2017-CTR”], the liability to pay tax is on the recipient of such
services on RCM as licensing services for right to use minerals
including exploration and evaluation are provided by the
Government to a business entity, i.e., the recipient.
Though not binding, the sectoral FAQs published by the CBIC
categorically state that royalty payment made towards licensing
services for exploration of natural resources is treated as supply of
services. The relevant extracts from CBIC FAQs on Government
Services are reproduced below:
“Question 1: Are all services provided by the Government or
local authority exempted from payment of tax?
Answer: No, all services provided by the Government or a local
authority are not exempt from tax. As for instance, services,
namely,
(i) services by the Department of Posts by way of speed post,
express parcel post, life insurance, and agency services
provided to a person other than Government;
(ii) services in relation to an aircraft or a vessel, inside or
outside the precincts of an airport or a port;
(iii) transport of goods or passengers; or
(iv) any service, other than services covered under (i) to (iii)
above, provided to business entities are not exempt and
that these services are liable to tax.

27
Practical FAQ’s under GST

That said, most of the services provided by the Central

Government, State Government, Union Territory or local
authority are exempt from tax. These include services provided
by government or a local authority or governmental authority by
way of any activity in relation to any function entrusted to a
municipality under Article 243W of the Constitution and services
by a governmental authority by way of any activity in relation to
any function entrusted to a Panchayat under Article 243G of the
Constitution.
Question 30: Whether an amount in the form of royalty or
any other form paid/payable to the Government for
assigning the rights to use of natural resources is taxable?
Answer: The Government provides license to various companies
including Public Sector Undertakings for exploration of natural
resources like oil, hydrocarbons, iron ore, manganese, etc. For
having assigned the rights to use the natural resources, the
licensee companies are required to pay consideration in the
form of annual license fee, lease charges, royalty, etc. to the
Government. The activity of assignment of rights to use natural
resources is treated as supply of services and the licensee is
required to pay tax on the amount of consideration paid in the
form of royalty or any other form under reverse charge
mechanism.”
The relevant extracts from CBIC FAQs on Mining which talks about
GST applicability on royalty under mining lease is also reproduced
below:
“Question 22: Whether GST is payable on royalty (to be paid
to Government) for mining lease granted by State Govt.
Answer: Yes, on royalty GST will apply under reverse charge
mechanism. Further, such payment of GST under reverse
charge mechanism would be eligible as ITC in the hands of the
recipient of supply for payment of GST.”
In view of above, GST on royalty paid towards mining shall be paid
under RCM by the recipient.

28
 Supply and Levy

Q28. What is the difference between ‘sale’ and ‘transfer’ and if there
is no major difference then why both the terms are given
separately?
Ans. Section 7 of the CGST Act provides an inclusive definition of the
term “supply” and discusses various forms of supply. Transfer is
much broader term than sale. ‘Sale’ is limited to transfer of property
in goods, whereas, ‘transfer’ includes transaction in goods & service,
where property in goods may/ may not be transferred like branch
transfer, goods sent on approval basis, goods sent on job work etc.
It may be full or partial and it may even be for intangibles/ rights.
Q29. A charitable trust registered under section 12AA of the Income
Tax Act providing free supply of food to needy people. Many
people to encourage this noble cause gave donation to this
trust specifically mentioning that the donation is towards poor
feeding. The total donation amount exceeds 20 lakhs. What is
the GST implication?
Ans. Free supply of food to poor is not a supply as -
✓ There is no consideration involved in the transaction.
✓ Trust and poor people cannot be treated as related party within
the scope of the Explanation to section 15 of the CGST Act.
✓ Charitable trust giving free food to the poor people free of cost
does not satisfy the conditions specified in clauses (a), (b) & (c)
of sub-section (1) of Section 7 of the CGST Act. Therefore, the
same shall not be construed as supply and hence, such activity
is outside GST.
Further, donations received from the individual donors will not
amount to supply, assuming they all satisfied the conditions
or guidelines specified in Circular No.116/35/2019-GST dated
11.10.2019, i.e.
(i) The gifts or donation is made to a charitable organisation
(ii) The payment has the character of gift or donation
(iii) The purpose is philanthropic and not advertisement

29
Practical FAQ’s under GST

(iv) It leads to no commercial gain, no reference or mentioning of

any business activity of donor.
Q30. (a) If any goods are supplied by a principal to his job-worker
free of cost, which were supposed to be procured and
supplied by the job worker himself in terms of the
agreement, would such transaction (by the principal to the
job worker) be considered as supply?
(b) If not, whether the principal has to reverse the ITC on
supplies so made free of cost? [under section 17(5) (h) of
the CGST Act]
Ans. (a) Clause (b) of sub-section (2) of section 15 of the CGST Act
provides that any amount the supplier is liable to pay in relation
to the supply but which has been incurred by the recipient will
form part of the valuation for that particular supply, provided it
has not been included in the price for such supply. Accordingly,
it is inferred that the value of any goods supplied by a principal
to his job worker free of cost, which were supposed to be
procured and supplied by the job worker himself in terms of the
agreement, shall be considered as taxable supply. The valuation
of such supply has to be done as per the CGST Valuation
Rules.
(b) As the above transaction is considered as taxable supply, there
are no restrictions for availing the ITC. It is pertinent to note
that, in view of the provisions contained in clause (b) of
sub-section (2) of section 16 of the CGST Act, ITC would be
available to the principal, irrespective of the fact whether the
inputs or capital goods are received by the principal and then
sent to the job worker for processing, etc. or whether they are
directly received at the job worker’s place of business/premises,
without being brought to the premises of the principal. Thus, the
principal is eligible for the ITC on supplies made to the job
worker free of cost.
Q31. A company is manufacturing and supplying face masks and
ventilator to Government at subsidized rates. Will it constitute
supply under GST?

30
 Supply and Levy

Ans. Supply of goods to Government constitutes a supply under GST law

unless such supply is specifically exempted from the levy of tax by
any notification. No exemption notification has been issued in this
regard so far in respect of supply of mask and ventilator under GST
law.
Hence, the manufacturing and supplying face mask and ventilator to
Government at subsidized rate would constitute a supply under GST
law and leviable under GST.
Q32. Whether sale of plots developed from agricultural land is supply
under GST?
Ans. In terms of Notification No. 3/2019-Central Tax (Rate) dated
29.03.2019, the term “real estate project (REP)” shall have the same
meaning as assigned to it in clause (zn) of section 2 of the Real
Estate (Regulation and Development) Act (RERA), 2016 (16 of
2016).
The definition of REP under RERA is reproduced below:
(zn) "real estate project" means the development of a building or
a building consisting of apartments, or converting an existing
building or a part thereof into apartments, or the development of
land into plots or apartment, as the case may be, for the
purpose of selling all or some of the said apartments or plots or
building, as the case may be, and includes the common areas,
the development works, all improvements and structures
thereon, and all easement, rights and appurtenances belonging
thereto;
In view of the above, sale of developed plots is covered under
‘taxable project’ and hence shall be construed as a supply. However,
the agreement or contract has to be read in full and based on the
said reading, a different view is possible. It has to be seen whether
land is conveyed or a developed plot with all facilities is conveyed.
The manner of charging consideration will also impact the question
of taxability.

31
Practical FAQ’s under GST

LEVY (including Exemption)

Q33. Is GST leviable on alcoholic liquor served by a hotel to its
customer?
Ans. No. The supply of alcohol by a hotel is outside the ambit of GST as
the charging Section 9(1) of the CGST Act/ Section 5(1) of the IGST
Act, excludes supply of alcohol for human consumption. The supply
of alcohol for human consumption would be subject to taxes levied
by the State Government.
Q34. Whether GST is leviable on supply of alcohol for manufacturing
of certain chemical products like phenol etc.?
Ans. As per Section 9 of the CGST Act, supply of alcohol for human
consumption alone is kept outside the ambit of GST. If alcohol is
supplied for manufacturing of certain products, then the same would
not be meant for human consumption and accordingly would be
leviable under GST.
Q35. Mr. X, an individual is running a petrol pump under
proprietorship. The Oil Company is paying the rent for the land
on which pump is situated. But the land is his personal asset.
Whether he has to charge GST on the land rent?
Ans. Supply of services of renting of immovable property including land is
covered under the definition of supply and the said supply is also
subject levy under section 9(1) of the CGST Act.
Even where an individual assessee is providing land, an immovable
property on lease basis for commercial purpose GST is applicable.
Renting of immovable property for residential purpose alone is
exempted.
Q36. When both alcoholic liquor for human consumption and
petroleum products do not attract the levy of GST, why are they
specified in different sub-sections of section 9 of the CGST Act
[section 9(1) and (2) respectively]?
Ans. Section 9(1) of the CGST Act/Section 5(1) of the IGST Act, provides
for the levy of GST excluding alcohol for human consumption, while
Section 9(2) of the CGST Act/Section 5(2) of the IGST Act provides
for the levy of GST on petroleum products at a later date.

32
 Supply and Levy

As per Article 279A (5) of Constitution of India, Goods and Services

Tax Council (“GST Council”) shall recommend the date from which
the goods and services tax shall be levied on petroleum crude, high
speed diesel, motor spirit (commonly known as petrol), natural gas
and aviation turbine fuel. A similar provision is not found for levy of
GST in respect alcoholic liquor for human consumption.
Further, the power to levy excise duty on alcoholic liquor for human
consumption still vests with States i.e., under List II of Seventh
Schedule to the Constitution of India. Since alcoholic products are
not listed either in the Union List or the Concurrent list, the Central
Government does not have the power to levy and collect tax on
alcoholic products mentioned in the State list.
Thus, different provisions have been specified for alcoholic liquor for
human consumption and certain petroleum products in GST law to
explain clearly the taxability or otherwise of these goods.
Q37. Will the value of a car taken on finance lease by the employer
for a period of 4 years and ultimately to be purchased by
employee at written down value (“WDV”) at the end of the
4th year be subject to GST?
Ans. We have to understand first that the vehicle is under finance lease;
which means that the company does not have the title to the goods.
The title to goods will get transferred only after the completion of the
lease period and on accepting the option to purchase the underlying
assets. If the lease agreement has specified the value to the paid for
accepting the option of purchase, then same will be a supply.
After the transfer of the title of underlying assets, the said asset
would qualify as “business asset” and selling it to their employee will
be treated as supply of goods. It is pertinent to note that clause (a)
of the Entry No. 4 to Schedule II of the CGST Act, classified the
following transaction as supply of goods:
“where goods forming part of the assets of a business are
transferred or disposed of by or under the directions of the
person carrying on the business so as no longer to form part of
those assets, such transfer or disposal is a supply of goods by
the person;”
Hence it is subject to GST.

33
Practical FAQ’s under GST

Q38. State the GST implication/applicability in case of: -

1. Sale of land
2. Sale of building
3. Sale of land and building
Ans. Schedule III of the CGST Act, lists out the activities or transactions
to be treated as supply of goods or supply of services. Entry No. 5 of
this Schedule reads: “Sale of land and, subject to clause (b) of
paragraph 5 of Schedule II, sale of building” meaning that sale of
land will not be treated as a supply but a sale of building will not be
a supply subject to Entry No. 5(b) of Schedule II.
Entry No. 5(b) of Schedule II reads:
“construction of a complex, building, civil structure or a part
thereof, including a complex or building intended for sale to a
buyer, wholly or partly, except where the entire consideration
has been received after issuance of completion certificate,
where required, by the competent authority or after its first
occupation, whichever is earlier.”
This entry seeks to tax the agreement to sell an immovable property
as a supply of service. In other words, where the consideration
(whether in part or full) for the construction of a complex or building
has been received prior to obtaining its completion certificate, it will
be treated as a supply of service and made liable to tax. Any
consideration received after obtaining completion certificate or first
occupation in such building, will not be liable to tax. Thus, sale of
building after completion certificate or first occupation will not be
treated as a supply under GST law and therefore not liable to tax.
As far as sale of land and building is concerned, if the building has
received completion certificate it will not be a supply and hence no
tax will be payable. If the building is under construction, then the
consideration received towards the land and building will be treated
as a supply.
Q39. Whether sale of inherited gold by one jeweller to another
jeweller is liable to GST?
Ans. Section 7 of the CGST Act which defines ‘supply’ includes all forms
of supply of goods and services. The fact of inheritance of gold

34
 Supply and Levy

would not make any difference with respect to taxability of any

goods (gold). Hence, the sale of gold by a jeweller to another
jeweller would be liable to GST.
Q40. Mr. X, a Chartered Accountant is holding Registration
Certificate under GST. Now, if he sells his personal diamond,
will he be liable to tax under GST?
Ans. ⚫ The taxable event under GST is supply of goods or services or
both. The term “supply” has been inclusively defined under
Section 7 of the CGST Act.
• Only those activities or transactions that are in the course or
furtherance of business shall qualify as ‘supply’ under GST and
tax thereunder shall be applicable on such supplies.
• Hence supplies made by an individual in his personal capacity
do not come under the ambit of GST unless they fall within the
definition of ‘business’ as defined under Section 2(17) of the
CGST Act.
• Sale of goods or rendering of service even as a vocation or as a
one-time activity shall fall under the definition of business and
shall constitute supply under GST.
• Though the definition of ‘business’ under section 2(17) includes
one-time activity as business, it is very important to note if the
activity is in the nature of business. Therefore, activities which
are not in the nature of business, whether done once or more,
would not be considered as a supply. Thus, sale of personal
diamonds (which is not in the nature of business), shall not be
subject to GST. Also it is equally important to study the facts of
each case just to make sure that the activity of selling personal
effects is not a business activity.
Q41. Explain whether donations and seva contributions received by
temples is leviable under GST?
Ans. Section 7 of the CGST Act provides, that the expression “supply”
includes all forms of supply of goods or services or both such as
sale, transfer, barter, exchange, licence, rental, lease or disposal

35
Practical FAQ’s under GST

made or agreed to be made for a consideration by a person in the

course or furtherance of business.
Further, the definition of consideration [Section 2(31) of the CGST
Act] also states that the money received should be in response to, or
for the inducement of, the supply of goods or services or both.
From the above, it can be seen that the donations and seva
contributions received by the temples shall not be construed as
consideration being made in relation to any supply of goods or
services or both in the course or furtherance of business (i.e.) there
is no quid pro-quo and hence GST shall not be applicable.
Q42. We are registered as an AOP and are conducting seminars for
women employees. Our yearly transaction value is ` 22 lakhs
and for conducting seminar we are collecting amounts from
public sector undertaking (PSUs). Kindly clarify whether PSUs
have to pay GST for delegate fee and claim ITC.
Ans. As per Section 22 (1) of the CGST Act, the threshold limit for GST
registration in case of supply of service is ` 20 Lacs; hence the said
AOP should get registered under GST. Every registered person is
liable to collect GST on supply of services and therefore the AOP
should charge GST on amount received from the PSU. If delegate
fee paid by the PSU is in the course or furtherance of business, only
then the PSU will be eligible to claim ITC.
Q43. Whether liquidated damages are leviable under GST?
Ans. ⚫ As per Section 7 (1A) of the CGST Act read with Entry 5(e) of
Schedule II of the CGST Act, agreeing to the obligation to
refrain from an act, or to tolerate an act or a situation, or to do
an act, shall be treated as supply of service.
• Further, under the erstwhile Service Tax regime, Section 66E of
the Finance Act, 1994 declared certain transactions which
cannot be normally construed as service but are deemed to be
service as covered by the provisions on liquidated damages.
• Also, under the erstwhile Central Excise Act, 1944 there have
been various cases wherein the issue of including liquidated
damages in the transaction value of the basic product being
cleared, have been discussed. In this regard, attention is invited

36
 Supply and Levy

to the decision of Larger Bench of the Customs, Excise and

Service Tax Appellate Tribunal (“CESTAT”) in the case of
Victory Electricals Limited [2013 (298) E.L.T. 534 (Tri-LB)]. The
CESTAT held that, while liquidated damages is in the nature of
reasonable estimate of the loss suffered on account of non-
fulfilment of the terms of the contract, penalty is in the nature of
a stipulation in terrorem. The Larger Bench of Chennai held
that, the value payable after factoring in any liquidated damages
contractually stipulated for delayed supply would be the
transaction value for levy of excise duty. The same was upheld
recently in the case of M/s. Flexo Foam Pvt. Ltd. [2017 (6) TMI
212] - CESTAT Chandigarh as well.
• Under GST regime, it is relevant to note that Sl. No 62 of NN
12/2017-CTR/ Sl. No 65 of NN 9/2017-ITR provides for
exemption as below:
“Services provided by the Central Government, State
Government, Union territory or local authority by way of
tolerating non-performance of a contract for which
consideration in the form of fines or liquidated damages is
payable to the Central Government, State Government,
Union territory or local authority under such contract”.
• In view of the above, it appears that liquidated damages
charged by the Government or the local authorities alone are
exempt from levy of GST and GST on liquidated damages is
applicable except on the ones received by the Government or
the local authority.
• Also, the CBIC vide GST sectoral series FAQs on Mining,
reiterated that the liquidated damages would be liable to GST.
The relevant extract of the FAQ flyer is reproduced below:
“Question 15: Whether deduction of Liquidity Damage (LD)/
Penalty deduction from contractor’s bills and charging Penalty
for non-lifting of coal till targeted minimum level to Annual
Contractual Quantity (ACQ) will attract GST?
Answer: Yes, it is a service being “tolerating an act” as per
Schedule II of the CGST Act, 2017 thus GST shall apply.”

37
Practical FAQ’s under GST

Q44. Whether penal charges collected attracts GST?

Ans. A transaction shall be considered as supply, if it satisfies all the
conditions of section 7 of the CGST Act. Further, the same shall be
classified as goods or service in relation to Schedule II of the CGST Act.
As per Entry No. 5(e) of Schedule II of the CGST Act, an activity to
be treated as supply of services includes “agreeing to the obligation
to refrain from an act, or to tolerate an act or a situation, or to do an
act ".
Further "to tolerate an act" can be understood as the consideration
being charged by one person to allow another person to undertake
any particular activity.
"Agreeing to the obligation" can be understood as the obligation to pay
a consideration for an act involved in a supply.
Hence, penal charges imposed by the service provider to a service
recipient for a breach of contract (i.e., for loss of parking ticket)
attracts GST and it is a taxable supply.

Cause for Penal Charges

Delay in payment of Other than delay in payment of

consideration consideration

1. Added to the value of Not to be added to the value of

original supply as per original supply
section 15(2)(d) of the 1. To be treated as separate supply
CGST Act
2. Will attract residual rate of 18%
2. Will attract the same
rate as for original
supply

Q45. Is GST leviable on the compensation received on account of the

damage caused to a residential flat due to road widening
activity? Will the answer be different if the residential flat owner
is registered under GST?

38
 Supply and Levy

Ans. The compensation received on account of the damage caused to a

residential flat due to road widening activity is not in the course or
furtherance of his business. Hence, GST is not leviable on such
compensation irrespective of whether the supplier is registered or
unregistered.
It is also worthwhile to note that the Hon’ble Bombay High Court has
held in the case of Bai Mamubai Trust v. Suchitra (Order date: 13
Sep 2019), that liability to pay GST would arise only where the
payment received can be linked to a supply. In case of
compensatory damages, the payment is for loss suffered and not
supply effected. While the process of determining loss suffered may
be the value of the consideration receivable if the contract had been
performed, such process of computing damages will not alter the
character of the payment, namely compensation for loss suffered.
This is premised on the principle that the supply doctrine does not
encompass a wrongful unilateral act or any act resulting in payment
of damages. Hence, insurance claim received by the registered
person on loss of insured business asset is not liable to GST.
Q46. Where a laptop is damaged by an employee and the company
recovers certain amount from the employee, is it a supply being
a tolerance of act? If yes, whether the same is leviable under
GST?
Ans. As provided under section 7(1)(a) of the CGST Act, the scope of
supply includes all forms of supply of goods or services or both such
as sale, transfer, barter, exchange, licence, rental, lease or disposal
made or agreed to be made for a consideration by a person in the
course or furtherance of business.
From the above we can infer that the activity will qualify as “supply”,
when it is for a consideration. In other words, supply involves an
element of contractual relationship wherein the person doing an
activity does so at the desire of the person for whom the activity is
done in exchange for a consideration. Accordingly, if the service
contract has a clause for recovery of cost connecting to damage of
the laptop from the employee then the said transaction will not
qualify as ‘activity for consideration’, because of the following
reasons:

39
Practical FAQ’s under GST

(a) The services by an employee to the employer in the course of or

in relation to his employment are outside the scope of GST
(neither supply of goods nor supply of services). It follows
therefrom that supply by the employer to the employee in terms
of contractual agreement entered into between the employer
and the employee, will not be subjected to GST. [C.B.E. & C.
Press Release No. 73/2017, dated 10.7.2017]
(b) The contract of indemnity is an actionable claim provided it is
not against public policy or unlawful to be valid. A right of
indemnity lies where one party is required to make good certain
losses experienced by the other party. The employer had not
entered into the contract principally to make or agreed to make
the supply, which is to tolerate an act or a situation.
(c) It is more in the nature of penal levy or fine for improper
handling or collection of damages and hence it cannot be a
supply and conditions of Section 7 are not satisfied.
Besides the above, for the argument that the activity shall fall in
Entry 5(e) of the Schedule II of CGST Act, i.e., “agreeing to the
obligation to refrain from an act, or to tolerate an act or a situation,
or to do an act”, it is to be understood that inclusion of a transaction
in Schedule II, would not make a transaction "supply" unless it
qualifies the phrase ‘activity for consideration’. As the activity fails
the test of section 7(1) (a) of the CGST Act, falling under Schedule II
thereof, shall not make it taxable either.
Q47. Would GST be leviable on sales promotion schemes given by a
manufacturer to a distributor in the form of free samples and
gifts?
Ans. Sales promotion schemes in the form of free samples and gifts do
not fall within the scope of supply under section 7(1) (a) of the CGST
Act, due to the absence of consideration. In such case the ITC shall
be blocked under section 17(5) (h) thereof. Alternatively, if the said
sales promotion schemes fall within the scope of supply under
section 7(1) (c) read with Schedule I of the CGST Act, such sales
promotion schemes shall be considered as supply even in the
absence of consideration. In such case, the ITC shall be eligible
under section 16 of the CGST Act. This legal position has been
clarified in CIR 92.

40
 Supply and Levy

Q48. Is GST leviable on liquor licence? Is GST leviable on

commission? Is GST leviable on incentives received by a liquor
vendor for promotion of liquor sales? Is GST leviable on rental
income received by the said liquor vendor?
Ans. Supply of alcoholic liquor for human consumption is outside the
ambit of GST. Notification No. 25/2019, Central Tax (Rate) dated
30.09.2019 provides that the activities or transactions undertaken by
the State Government in which they are engaged as public
authorities, shall be treated neither as a supply of goods nor supply
of service. Relevant portion thereof reads
"Service by way of grant of alcoholic liquor licence, against
consideration in the form of licence fee or application fee or by
whatever name it is called."
Thus, service by way of grant of liquor licence by the State
Government is not a supply under GST and hence no tax can be
levied.
The incentive received by the liquor vendor will be liable to GST as it
will be covered by the definition of supply.
The rental income received by the liquor vendor will also be treated
as a supply in GST and should be considered for the purpose of
calculating aggregate turnover. The taxability of such rental income
will depend upon whether the let out of the property is for residential
or commercial purposes.
Q49. Whether GST is leviable on supply of certain goods, like
handmade items from the Central Jail to the Government?
Ans. The term ‘person’ under section 2(84) of the CGST Act, includes the
Central / State Government and any corporation established by or
under any Central Act, State Act or Provincial Act. The relevant
extract is hereunder:
“(84) “person” includes —
(a) .....
(g) any corporation established by or under any Central Act,
State Act or Provincial Act or a Government company as

41
Practical FAQ’s under GST

defined in clause (45) of section 2 of the Companies Act, 2013

(18 of 2013);
……
(k) Central Government or a State Government;
……;”
Indian Prisons Act of 1894 is established under the State Act
Supplier --> Central Jail --> Covered in the definition of ‘person’
under section 2 (84)
Recipient --> Government --> Covered in the definition ‘person’
under section 2 (84)
Nature of Supply --> Supply of goods
Related person as per Explanation to section 15 of the CGST Act,
includes both (Central Jail & Government Department.) which are
directly or indirectly controlled by a third person (Government). The
relevant extract is as under:
“Explanation. — For the purposes of this Act, —
(a) persons shall be deemed to be “related persons” if —
(i) ………
(vi) both of them are directly or indirectly controlled by a
third person;
………….”
Supply includes activities specified in Schedule I of the CGST Act, to
be treated as supply even if made without consideration
The above transaction is a supply as per section 7(1) (c) &
Schedule I of the CGST Act
Handmade items are taxable supplies.
GST is leviable on supplies made by Central Jail to Government even if
they are without consideration.
Q50. Whether the amount recovered from a contract employee
(person on the third-party rolls) on account of Notice period
leviable under GST?

42
 Supply and Levy

Ans. Entry No. 5 (e) of Schedule II of the CGST Act states:

“The following shall be treated as supply of services, namely:-
(a) …
(b) agreeing to the obligation to refrain from an act, or to
tolerate an act or a situation, or to do an act;..”
Therefore, as per Entry 5(e) of Schedule II, agreeing to do or not to
do or to tolerate an act shall be deemed to be a supply of service.
Hence, the act of recovering an amount from the employee by the
employer could be treated as tolerating an act by the employer and
could get come under the ambit of GST and hence leviable to GST
Any amount recovered by the taxable person from the contract
employee, who is on the rolls of such taxable person, on account of
notice period could attract the levy of GST.
Q51. Whether advance received for sale of land forfeited leviable
under GST?
Ans. Schedule III to the CGST Act stipulates activities which shall neither
be treated as supply of goods nor supply of services. In other words,
it falls outside the scope of GST.
Entry No. 5 of Schedule III to the CGST Act which provides that sale
of land is not a supply reads as :
“Sale of land and, subject to clause (b) of paragraph 5 of
Schedule II, sale of building.”
In view of the above, it is clear that sale of land is outside the
purview of GST. Therefore, GST is not applicable on any advance
receipts forfeited towards the underlying activity of sale of land
which is not a supply.
Q52. Whether GST is leviable on grants / donations received by a
Trust, if the document giving grant asks for Utilisation
Certificate?
Ans. GST is levied on supply of goods or services or both. Grants and
donations received by Trust which has no nexus with respect to any
supply of goods or services are not to be treated as supply, but
purely as a donation to be used for specified purpose / object.

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Practical FAQ’s under GST

Accordingly, the same would not be liable to GST. If the grants or

donations are received by a Trust towards supply of goods or
services which are not exempt then the same would be liable to
GST.
Q53. Whether insurance claim received by the registered person on
loss of insured business asset be liable to GST as if it were the
sale consideration of the said asset?
Ans. As the Hon’ble Bombay High Court held in the case of Bai Mamubai
Trust v. Suchitra (Order dated: 13 Sep 2019), that liability to pay
GST would arise only where the payment received can be linked to a
supply. In case of compensatory damages, the payment is for loss
suffered and not supply effected. While the process of determining
loss suffered may be the value of the consideration receivable if the
contract had been performed, such process of computing damages
will not alter the character of the payment, namely a compensation
for loss suffered. This is premised on the principle that the supply
doctrine does not encompass a wrongful unilateral act or any act
resulting in payment of damages. Hence, insurance claim received
by the registered person on loss of insured business asset is not
liable to GST.
Q54. Is GST leviable on sale of old newspapers?
Ans. The question to be decided is whether old newspapers continue to
be called as newspapers or not. Newspapers are sold to the public
as a medium containing information regarded as news. They are
purchased by the readers to acquaint themselves with the news that
is fresh and new. With the lapse of time it ceases to be newspaper.
When they are disposed off as waste paper, their sale cannot be
regarded as sale of newspapers. It is assumed that the person is not
in the business of printing and selling old newspapers. In such a
case, the newspaper ceases to be a newspaper and is sold normally
by weight as a waste paper. Thus, GST at 5 per cent shall be
leviable as “recovered waste or scrap of paper or paperboard”.
However, the Supreme Court in the case of Sait Rikhaji Furtarnal
and Another v. State of Andhra Pradesh [1990 (8) TMI 344 (SC)]
- , held that even if the newspapers are not of the same date or of a
current period, their contents had news value and thus they
continued to be the newspapers and the mere fact that they were

44
 Supply and Levy

out of date did not take away the news element therefrom. Then sale
of old newspapers will be treated as sale of newspaper only and will
be exempted from tax vide Notification No. 12/2017 - CT (Rate)
[“Newspapers, journals and periodicals, whether or not illustrated or
containing advertising material”].
Q55. Mr. A is dealing in installation services of air conditioning
equipment. He needs to use the tools and equipment worth
more than ` 50,000 at various sites across India.
(a) Is GST leviable on such movement of tools & equipment to
various sites across India?
(b) Is there any requirement for e-way bill for such movement?
Ans. (a) Circular No. 21/21/2017-GST dated 22.11.2017, inter alia
stipulates as under:
“2. The issue pertaining to inter-state movement of rigs,
tools and spares, and all goods on wheels [like cranes]
was discussed in GST Council’s meeting held on 10the
November, 2017 and the Council recommended that the
circular 1/1/2017-IGST shall mutatis mutandis apply to inter-
state movement of such goods, and except in cases where
movement of such goods is for further supply of the same
goods, such inter-State movement shall be treated
‘neither as a supply of goods nor supply of service,’
and consequently no IGST would be applicable on such
movements.”
(b) Though the above circular, treats inter-State movement of tools
and spares neither as a supply of goods nor as supply of
service, the exemption for e-way bill is only available where the
supply of goods being transported is treated as no supply under
Schedule III of the CGST Act. Hence, as per rule 138(1) of the
CGST Rules, e-way bill is mandatory for Mr. A, who causes
movement of goods of consignment value exceeding fifty
thousand rupees subject to the provisions contained in
rule 138 (14) thereof.
Q56. Payment gateways like PayPal, Strap etc. charge service fees
for processing of payment. Whether GST is payable on reverse
charge basis on such service fees?
Ans. As per Section 7 of the CGST Act, the term “supply” includes all

45
Practical FAQ’s under GST

forms of supply of goods and services. There is no specific

exemption available for service fees charged by the payment
gateways like Pay Pal etc. for processing payment under GST law.
Hence, such service fee charged for processing payment is exigible
to GST. Also, the services provided by the payment gateways are
not specifically covered under RCM pursuant to section 9(3) or 9(4)
of the CGST Act, and in that view of the matter RCM is not
applicable and tax payment method has to be forward charge only.
However, where the above services are received by a person
situated in the taxable territory from any person located outside
India then, as importer of services, such receiving person is liable to
be tax in respect of the service charges paid by him in view of the
provisions of section 7 (1)(b) of the CGST Act.
Moreover, if such services are received from a person located
outside India by the Central Government, State Government, Union
territory, a Local Authority, a Governmental Authority or an individual
in relation to any purpose other than commerce, industry or any
other business or profession or an entity registered under
section 12AA of the Income-tax Act, 1961 for the purposes of
providing charitable activities, then the same shall be exempted in
terms of NN 9/2017-ITR.
Q57. Whether an e-commerce operator not having permanent
establishment (“PE”) in India will be covered under Section 9 of
the CGST Act, on products sold by them in India?
Ans. As per Section 9(5) of the CGST Act, the Central Government may,
specify categories of services the tax on intra-State supplies of
which shall be paid by the electronic commerce operator if such
services are supplied through it, and all the provisions of this Act
shall apply to such e-commerce operator as if he is the supplier
liable for paying the tax in relation to the supply of such services.
Since, Section 9(5) covers only services, goods sold by e-commerce
without any PE in India may not get covered thereunder.
It may also be noted that where the taxable goods are sold by the
e-commerce operator, it is taxable as per section 9(1) of the CGST
Act if the transaction takes place amongst persons located within the
taxable territory. If the goods are received by a registered person
from an e-commerce operator not having a PE in India it may be

46
 Supply and Levy

normally taxable as reverse charge vide proviso to section 5 of the

IGST Act.
Q58. Mr. X has a two-wheeler service center and decides to expand
his business line by introducing the automatic painting division
in his workshop. The cost of the automatic spray robot, which
he desires to install in his workshop, ranges from ` 8.25 Lakhs
to ` 8.5 Lakhs. M/s. Spray & Spray, one of the suppliers of
automatic spray robot, is ready to give the said machine for `
6.5 Lakhs. However, the condition for such a discounted price
was that Mr. X will overhaul, paint and chrome the parts of the
vintage bike belonging to the founder of the company.
Mr. X estimated the following cost of repair after observing the
said vintage bike:
A. Cost of spares - ` 70,000
B. Cost of paint - ` 20,000
C. Cost of chrome and nickel – ` 45,000
D. Cost of time spent - ` 25,000
E. Total ` 1.70.000
He feels that the total cost of the robot will be only ` 8.2 Lakhs
(6.5 + 1.7) and hence it is a viable option. He wants an expert
opinion as to whether the activity provided by him for getting
the discount will be subject to GST?
Ans. Section 7 (1) (a) of the CGST Act, has explicated the scope of
supply; which includes all forms of supply of goods or services or
both such as sale, transfer, barter, exchange, licence, rental, lease
or disposal made or agreed to be made for a consideration by a
person in the course or furtherance of business. Thus, it is apparent
that the exchange is one of the forms of supply and it is taxable
under GST when carried out by a person in the course or
furtherance of business. In other words, there should be an element
of express or implied contractual reciprocity of a consideration. In
the given query, both the parties had agreed to undertake the
commercial activity, and hence the exchange of service for a
discount price will constitute supply.

47
Practical FAQ’s under GST

From the above discussion, it is clear that the activity is a supply

and will be subject to tax. However, the absence of monetary
consideration to the transaction had paved the way for valuation
rules. In this scenario, price is not the sole consideration and thus
the transaction would be covered under section 15(4) of the CGST
Act. Accordingly, the valuation shall be as per Rule 27 of the CGST
Rules reproduced below:
“Rule 27- Value of supply of goods or services where the
consideration is not wholly in money
Where the supply of goods or services is for a consideration not
wholly in money, the value of the supply shall, -
(a) be the open market value of such supply;
(b) if the open market value is not available under clause (a), be the
sum total of consideration in money and any such further
amount in money as is equivalent to the consideration not in
money, if such amount is known at the time of supply;
(c) if the value of supply is not determinable under clause (a) or
clause (b), be the value of supply of goods or services or both of
like kind and quality;
(d) if the value is not determinable under clause (a) or clause (b) or
clause (c), be the sum total of consideration in money and such
further amount in money that is equivalent to consideration not
in money as determined by the application of rule 30 or rule 31
in that order.
Illustration:
(1) Where a new phone is supplied for twenty thousand rupees
along with the exchange of an old phone and if the price of the
new phone without exchange is twenty four thousand rupees,
the open market value of the new phone is twenty four thousand
rupees.
(2) Where a laptop is supplied for forty thousand rupees along with
the barter of a printer that is manufactured by the recipient and
the value of the printer known at the time of supply is four
thousand rupees but the open market value of the laptop is not

48
 Supply and Levy

known, the value of the supply of the laptop is forty four

thousand rupees”.
Accordingly, there are two separate supplies in the given scenario,
which is also akin to the illustration provided under Rule 27 of the
CGST Rules - (1) the supply of (exchanged) service from Mr. X and
(2) supply of new fixed assets. Both these transactions are in
furtherance of business for consideration and hence, both are
taxable and the valuation of supply would be as per Rule 27.
Q59. Whether exchange of an old car for a new car attracts GST? If
yes, what is the value of the supply?
Ans. Section 7 of the CGST Act provides that the expression “supply”
includes all forms of supply of goods or services or both such as
sale, transfer, barter, exchange, licence, rental, lease or disposal
made or agreed to be made for a consideration by a person in the
course or furtherance of business.
Further, the definition of consideration [Section 2(31) of the CGST
Act] also covers any payment made or to be made, whether in
money or otherwise, in respect of, in response to, or for the
inducement of, the supply of goods or services or both.
Therefore, it is clear that consideration in kind under barter system
shall also be liable to GST. Rule 27 of the CGST Rules, provides for
determining the value of supply of goods or services where the
consideration is not wholly in money. [Please refer Q 58 for Rule 27
as reproduced there].
In the instant case, if the new car is priced at ` 5,00,000 and old car
is exchanged for ` 1,00,000 the net price payable shall be
` 4,00,000. However, under GST law, the value of supply shall be
the open market value of the new car which is ` 5,00,000 and GST
shall be applicable on ` 5,00,000.
Q60. Mr. X buys an asset for the purpose of business and in
exchange gives an existing asset. Whether such exchange
constitutes supply and leviable to tax under GST?
Ans. Section 7(1) (a) states:
“For the purposes of this Act, the expression “supply” includes —
(a) all forms of supply of goods or services or both such as

49
Practical FAQ’s under GST

sale, transfer, barter, exchange, licence, rental, lease or

disposal made or agreed to be made for a consideration by
a person in the course or furtherance of business”
From the above provision of section 7 of the CGST Act, barter/
exchange is one of the forms of supply. Since, the same qualifies as
“supply” and no exemption is available, the same is exigible to tax
under GST.
Further as per section 15 read with Valuation Rules, the value on
which GST is to be charged on such transaction will be the open
market value of the new asset as per Rule 27(a) of the CGST Rules.
Therefore, GST should be charged on the full value of the
transaction.
Q61. Where an employer provides food at subsidised cost to an
employee, whether the contribution by the employee exigible to
GST?
Ans. Example: Fresh Foods Canteens enter into an agreement with
Sachin India Limited to operate the canteen in the premises of the
company and provide food to the employees of the Sachin India
Limited. Sachin India Limited recovers a portion of the food cost
from the employees and pays the balance portion to the caterer.
The canteen arrangement is such that the supply of food is made by
the Fresh Food Canteens to the employees in the premises of
Sachin India Limited. Therefore, Sachin India Limited is a facilitator
of such food supply and not the supplier of such service per se.
Hence, such contribution / recovery from employees for providing
foods at the subsidised cost shall not be exigible to GST.
Q62. Whether an Award is exigible to tax under the GST law?
Ans. Section 7 of the CGST Act includes supply of goods or services in
the course or furtherance of business. The term “business” is
defined, in section 2(17) of the CGST Act, to include any trade,
commerce, manufacture, profession, vocation, adventure, wager or
any other similar activity, whether or not it is for a pecuniary benefit
To determine the taxability of an award, the specific nature and type
of the award would be crucial. Where an award or prize for winning a

50
 Supply and Levy

contest is received such award / prize would not be treated as

supply, since no supply of goods or service is involved in it. In case,
where the award is in the nature of interest dues or compensation
for delayed supply or payment etc., then such type of award can be
considered for the levy of GST. Hence, exigibilty to tax will depend
on the nature/ type of award.
Q63. Whether Arbitral Awards are exigible to tax under the GST law?
Ans. Section 7 of the CGST Act includes supply of goods or services in
the course or furtherance of business. The term “business” is
defined, in section 2(17) of the CGST Act, to include any trade,
commerce, manufacture, profession, vocation, adventure, wager or
any other similar activity, whether or not it is for a pecuniary benefit
To determine the taxability of an award, the specific nature and type
of award would be crucial. In the present case the award in hand is
an award received under arbitration proceedings. The tax liability
under an arbitration award would generally depend on the nature of
the award being granted. If the award granted is settlement between
the parties, then the same could fall under the ambit of Para 5(e) to
Schedule II of the CGST Act. However, if the award is punitive in
nature, then the same could not fall within the ambit of GST as there
is no supply for the same.
Q64. Whether penal interest received on an exempted supply is
taxable?
Ans. As per section 15(2) (d) of the CGST Act, 2017, the value of supply
shall include interest or late fee or penalty for delayed payment of
any consideration for any supply. When the principal supply is
exempted, the penal interest arising out of such supply shall also be
exempted from GST. (Circular No. 102/21/2019-GST dated
28.06.2019).
Q65. Whether the grant received from the Government is taxable?
Ans Section 7 (1) (a) of the CGST Act excogitate the scope of supply;
which includes all forms of supply of goods or services or both such
as sale, transfer, barter, exchange, licence, rental, lease or disposal
made or agreed to be made for a consideration by a person in the
course or furtherance of business

51
Practical FAQ’s under GST

This implies there should be an underlying contractual relationship

between the supplier and the recipient for supplying goods or services
on monetary or non-monetary terms. Mere receipt of the grant shall not
be considered as supply and hence cannot be made taxable under
GST.
Hence, it is appropriate to understand the meaning of the term
“consideration” in GST. As per section 2(31) of the CGST Act
consideration includes any payment made or to be made, whether in -
➢ money or otherwise or
➢ monetary value of any act or forbearance
in respect of, in response to, or for the inducement of, the supply of
goods or services or both, whether by the recipient or by any other
person.
From the above definition of the term “consideration”, we can infer
that one has to establish the existence of a connection between the
payment and supply. What is relevant is whether the grant has the
requisite nexus with a supply. If there is a nexus, the amount
received as a grant shall be considered as consideration for a
supply, since it is within the scope of supply under section 7(1) (a) of
the CGST Act.
For example, a research grant is given with a counter obligation on
the researcher to provide IPR rights on the outcome of research or
activity undertaken with the help of such grants then the grant is a
consideration for the provision of service of research. However,
general grants given for research with no obligation would not be
consideration for such research.
It is also important to differentiate between a grant and a subsidy.
Grants are usually financial support granted by the Government or
Institutions for specific purposes subject to the fulfillment of certain
conditions. Generally, these are a one-time lump sum payment and are
not required to be repaid. Subsidies are benefits given in the form of
payments or tax contributions or tax breaks. They are a privileged type
of financial aid given by the Government or Institutions to ease the cost
burden for the recipients of such subsidy.
It may be noted that subsidies provided by the Central Government and
State Governments are specifically excluded from the definition of

52
 Supply and Levy

‘consideration’ under section 2(31) of the CGST Act and is also

excluded from value of supply under section 15(2) (e) thereof.
Q66. Whether the reimbursement of rent paid is exigible to tax under
GST law? Whether electricity charges charged to tenant without
grid supply, chargeable to tax under GST law?
Ans. Section 15 of the CGST Act inter alia provides for the valuation of
supply to include all forms of incidental expenses.
Rent reimbursement
Rule 33 of the CGST Rules prescribes situations where expenditure
or cost incurred in the nature of “pure agent” shall be excluded from
the “value of supply”. The exclusion shall be subject to the fulfilment
of the following conditions prescribed -
(i) the supplier acts as a pure agent of the recipient of the supply,
when he makes the payment to the third party on authorisation
by such recipient;
(ii) the payment made by the pure agent on behalf of the recipient
of supply has been separately indicated in the invoice issued by
the pure agent to the recipient of service; and
(iii) the supplies procured by the pure agent from the third party as a
pure agent of the recipient of supply are in addition to the
services he supplies on his own account.
Hence, in the instant case, if the reimbursement of rent fulfils the
conditions prescribed in the above mentioned Rule 33 of the CGST
Rules as pure agency services, then such reimbursement of rent will
not be includible in the value of supply and consequently, no GST
shall be leviable. However, if the said conditions are not fulfilled,
then the rent reimbursement is exigible to GST. If the rent is for the
residential purposes, then it is not leviable to GST vide Sl.No.12
(Chapter Heading 9963 or 9972) in NN 12/2017-CTR/ Sl.No.13
(Chapter Heading 9963 or 9972) in NN 9/2017-ITR.
Electricity charges
As per Section 2(30) of the CGST Act, “composite supply” means a
supply made by a taxable person to a recipient consisting of two or
more taxable supplies of goods or services or both, or any

53
Practical FAQ’s under GST

combination thereof, which are naturally bundled and supplied in

conjunction with each other in the ordinary course of business, one
of which is a principal supply.
Generally, electricity is supplied along with renting of immovable
property and the same is naturally bundled in the ordinary course of
business.
The word “taxable supply” means a supply of goods or services or
both which is leviable to tax under this Act. Exempt supply means a
supply which is subject to nil rate of tax or exempt by way of
notification. While the definition of composite supply includes only
two or more taxable supplies, an exempt supply also includes a
taxable supply but subject to nil rate of tax or exempt by way of
notification. Supply of electricity by Transmission and Distributing
Utilities is subject to nil rate of tax and hence would fall under the
ambit of taxable supply which is exempt by way of nil rate of tax.
Hence, sale of electricity along with renting of premises would get
categorized as composite supply and the principal supply being
renting of immovable property and accordingly the entire
consideration, inclusive of rent and electricity charges, is exigible to
GST at the rate applicable to the renting services
It is also to be noted that, when electricity is supplied without Grid
supply to a tenant, it is taxable as per Sl.No 418 Schedule III of
Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017
[“NN 1/2017-CTR”]/ Notification No. 1/2017- Integrated Tax (Rate)
dated 28.06.2017 [“NN 1/2017-ITR”] with Chapter Heading 9028 at
the rate of 18%.
Q67. Whether trip fees collected from students by Football Academy
which in turn is spent on organising the trip for students (for
foreign coaching) is taxable under GST?
Ans. Sl.No. 80 of NN 12/2017-CTR / Sl.No. 83 of NN 9/2017-ITR exempts
services relating to sports provided by an entity registered under
Section 12AA of the Income-tax Act, 1961. The relevant entry is
reproduced below:
“Services by way of training or coaching in recreational activities
relating to- (b) sports by charitable entities registered under
section 12AA of the Income-tax Act.”

54
 Supply and Levy

Therefore, if the football academy is not a registered entity under

Section 12AA of the Income-tax Act, 1961, organising sports
coaching trip abroad shall be construed to be a commercial activity
and shall fall under the scope of supply and such consideration/fee
collected shall be taxable under GST.
However, if it is registered under section 12AA, then not taxable
under GST.
Q68. Whether sale of personal car taxable under GST?
Ans. ⚫ Section 7 of the CGST Act provides that the expression “supply”
includes all forms of supply of goods or services or both such as
sale, transfer, barter, exchange, licence, rental, lease or
disposal made or agreed to be made for a consideration by a
person in the course or furtherance of business.
⚫ Notification No. 10/2017-Central Tax (Rate), dated 28.06.2017
[“NN10/2017-CTR”] exempts intra-State supplies of second
hand goods received by a registered person, dealing in buying
and selling of second hand goods and who pays the central tax
on the value of outward supply of such second hand goods as
determined under sub-rule (5) of Rule 32 of the CGST Rules,
from any unregistered supplier, from the whole of the central tax
levied under the CGST Act. Similar exemptions are also there in
respective the State Goods and Services Tax Act (“the SGST
Act”).
• In view of the above, sale of personal car by an unregistered
person shall not be construed as a supply in the course or the
furtherance of business and hence GST shall not be applicable
on the sale of such used personal car if such sale is by way of
an intra-State supply.
• For instance, a company say M/s Secondcars India Ltd, which
deals in buying and selling of second-hand cars, purchases a
second-hand car from an unregistered person and sells the
same to its customers. The supply of the car to the company
from unregistered person shall be exempt and the supply of
the same by the company to its customer shall be exigible to
GST.

55
Practical FAQ’s under GST

Q69. Whether servicing of cars attracts tax under GST law?

Ans. Servicing of cars is to be treated as a supply under GST law.
Circular No. 47/21/2018-GST dated 8.06.2018, clarifies this point as:
Sl. Issue Clarification
No.
2. How is servicing of cars 2.1 The taxability of supply
involving both supply of would have to be determined on a
goods (spare parts) and case to case basis looking at the
services (labour), where the facts and circumstances of each
value of goods and services case.
are shown separately, to be
2.2 Where a supply involves
treated under GST?
supply of both goods and services
and the value of such goods and
services supplied are shown
separately, the goods and
services would be liable to tax at
the rates as applicable to such
goods and services separately.

Servicing of car, may involve the supply by way of replacement of

worn out or damaged parts or oiling etc. and related technical
services. In such a situation, the concept of composite supply is
applicable. Depending on the nature of the principal supply involved
in a transaction, be it goods or services the GST rate applicable for
such principal supply of goods or services shall be payable on the
entire consideration.
Q70. A doctor is in the business of running a diagnostic centre and
film distribution. He wants to sell the diagnostic machinery
from his diagnostic centre for which separate books of
accounts are maintained. Should he charge GST on the sale of
diagnostic machinery?
Ans. The sale of diagnostic machinery shall fall under the scope of
supply. Hence, it would be taxable under the provisions of the CGST
Act. Though separate books of accounts are maintained for the
exempted service (health care service), the exemption as notified
under NN 12/2017-CTR as amended from time to time is available

56
 Supply and Levy

for the supply of health care services only. However, it is important

to check whether there is any goods-based exemption available
under NN 2/2017-CTR as amended from time to time for the
diagnostic machinery based on a proper classification of the
diagnostic machinery. In the absence of any exemption, the sale of
diagnostic machinery will be liable to tax as a supply of goods.
Q71. Discuss the taxability and ITC availability in case a subsidiary
company receives free samples from the parent company and
subsequently transfers the same to the employees.
Ans. Supply includes activities specified in Schedule I of the CGST Act --
> to be treated as supply even if made without consideration
Parent company & subsidiary company --> Related person [as per
Explanation to Section 15 of the CGST Act]
Free Samples received by Subsidiary Co. from Parent Co. is a
supply as per Schedule I of the CGST Act - Supply of goods or
services or both between related person
Transaction between Parent Co. & Subsidiary Co. is a taxable
supply and attracts GST.
Subsidiary company & employee --> Related person [as per
Explanation to Section 15 of the CGST Act]
Free samples transferred to employee by a Subsidiary Co. is a
supply as per Schedule I of the CGST Act - Supply of goods or
services or both between related person
ITC can be claimed by the Parent Co. & Subsidiary Co as the
transaction qualifies the definition of supply as per Schedule I.
Note: Exception to the above is a gift to employee less than
` 50,000/- is outside the purview of supply as per Schedule I.
Further when the subsidiary company gifts the same to its
employee, the following aspects are to be considered:-

Situation Treatment
1) Subsidiary company has 1) ITC taken to be reversed as the
taken ITC on the samples gift to employee upto ` 50,000
received (being during the financial year is not a

57
Practical FAQ’s under GST

operational item, i.e. supply and further attracts

product they are dealing) blocked credit provision under
from parent company & Section 17(5) (h) of the CGST
gift value to the employee Act.
does not exceed ` 50,000
during the financial year
2) Subsidiary company has ✓ ITC taken to be reversed as the
taken ITC on the samples gift is blocked credit provision
received (Being under Section 17(5) (h) of the
Operational item, i.e. CGST Act and even though gift
product they are dealing) value exceeds ` 50,000 during
from parent company & the financial year it is a supply.
gift value to the employee However, the same has to satisfy
exceeds ` 50,000 during the provisions of Schedule I –
the Financial year Entry No. 1
✓ Since, ITC is reversed (deemed
as not taken), gift to employee
will not qualify as deemed supply
under Schedule I of the CGST
Act- Entry No.1
✓ But ITC to be reversed with
Interest under section 50(3) -
24% p.a.
3) Subsidiary company has 1) ITC is not availed
not taken ITC (Being non- 2) Gifted to employees
operational item, i.e. 3) Will not be treated as supply
product they are not
Crux - No ITC & No Output Tax
dealing and the purchase
Liability
is only for the purpose of
gifting during any
occassion) on the
samples received from
parent company

Q72. (i) M/s. X had purchased a motor car on 01.06.2016 for

` 10,00,000/- and used it for providing service classifiable under
the service head “Rent-a-Cab Service”. They decided to sell the
said motor vehicle for consideration of ` 9 lakh or ` 7 lakhs on
25.02.2018.

58
 Supply and Levy

They want opinion on the following questions:

a. Whether the transaction attracts GST?
b. If ‘Yes’ then what would be the tax rate and the value?
Ans. Section 7 (1) (a) of the CGST Act has explicated the scope of supply
which includes all forms of supply of goods or services or both such
as sale, transfer, barter, exchange, licence, rental, lease or disposal
made or agreed to be made for a consideration by a person in the
course or furtherance of business. Besides, Entry No. 4 (a) of
Schedule II of the CGST Act prescribes that if goods forming part of
the assets of a business are transferred under the directions of the
person carrying on the business so as no longer to form part of
those assets such transfer is also a supply of goods.
Thus, the car is a part of the business assets of the company as
the same is capitalized in the books; if it is transferred, then vide
section 7 (1) (a) read with Schedule II Entry 4 (a) of the CGST Act it
shall be termed as a “supply” and vide section 9 thereof, it shall be a
taxable supply. The Government vide NN 8/2018-CTR has
prescribed the rate of GST at 12% on the sale of old and used motor
vehicles. Further, an exemption has been provided on the cess
payable on the sale of an old and used motor vehicle vide
Notification No. 1/2018-Compensation Cess (Rate) dated
25.01.2018. Besides the above, the notification had stated that the
valuation would be based on the margin involved. The following ratio
has been provided in the Notification:

Sr. When the goods was purchased Formula

01. → Before / After GST and ITC taken Transaction Value
02. → Before / After GST and ITC not Profit Margin
taken

Note:
Profit margin: When depreciation is claimed under section 32 of the
Income Tax Act, 1961 - the difference between the consideration
received for supply of such goods and the depreciated value of such
goods on the date of supply, and where the margin of such supply is
negative, it shall be ignored.

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Practical FAQ’s under GST

Others - the difference between the selling and purchase price and
where such margin is negative, it shall be ignored.
If the selling price is greater than the purchase price/depreciated
value, then only the differential margin will be taxable. However,
where the selling price is lower than the purchase price/depreciated
value, then this amount should be ignored for the purpose of GST.
(ii) In the given query, M/s. X, a registered person in GST had
purchased a motor car on 1.06.2016 for ` 10,00,000. The said
car was sold on 25.02.2018 by them for: (a) ` 9,00,000
(b) ` 7,00,000. Determine the valuation under GST?
Ans. The depreciated value of the car as on 25.02.2018 is ` 10,00,000
Less 15% of 10,00,000 = ` 8,50,000.
a) If the sale value of the car is ` 9,00,000; ` 50,000 will be the
value for charging GST.
b) If the car is sold at ` 7,00,000, the margin will be negative and
hence it should be ignored.
However, this notification shall not apply, if the supplier of such
goods has availed ITC as defined in section 2(63) of the CGST Act,
CENVAT as defined in CENVAT Credit Rules, 2004 (“CCR 2004”) or
the ITC of VAT or any other taxes paid, on such goods.
Note: Since the query is only about sale of car (motor vehicle) which
is used for renting purpose, taxability of the supply of service in the
nature of rent-a-cab, under both forward charge and reverse charge,
has not been deliberated here.
Q73. Whether GST is payable on liquidation damages deducted from
payment to suppliers in case of delayed delivery of goods or
services?
Ans. Credit note or debit note can only be issued by the supplier under GST
Law.
Liquidation damages occur only when there is an act of non-
performance / breach of contract which need to be compensated
either by the supplier or recipient as the case may be.

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 Supply and Levy

As the recipient will not be able to raise the debit or credit note as
per GST law, the liquidation damages deducted from the payment to
suppliers constitute a supply --->
"Agreeing to the obligation" can be understood as the obligation to
pay a consideration for an act involved in a supply. Hence, as per
Schedule II of the CGST Act the same shall be considered as supply
of service for the purpose of classification.
The recipient has to raise an invoice and he is liable to pay GST on
liquidation damages deducted from payment to suppliers provided
the supplier is not Government.
If Supplier of such service (being tolerating an act of non-
performance) is Government (Central Government, State
Government, Union territory or local authority) it is exempt as per
Sl.No 62 of NN 12/2017-CTR/ Sl.No 65 of NN 9/2017-ITR.
Q74. Whether assets received on family settlement or partition of
HUF is chargeable to tax under GST law?
Ans. As per Entry No. 4 of Schedule II of the CGST Act, the following are
treated as supply-
“4. Transfer of business assets
(a) where goods forming part of the assets of a business are
transferred or disposed of by or under the directions of the
person carrying on the business so as no longer to form
part of those assets, such transfer or disposal is a supply of
goods by the person;
(b) ……
(c) where any person ceases to be a taxable person, any
goods forming part of the assets of any business carried on
by him shall be deemed to be supplied by him in the course
or furtherance of his business immediately before he
ceases to be a taxable person, unless-
(i) the business is transferred as a going concern to
another person; or
(ii) the business is carried on by a personal representative
who is deemed to be a taxable person.”

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Practical FAQ’s under GST

If the HUF is carrying on a business and if the business comes to an

end due to partition of HUF or otherwise and the assets are
partitioned/distributed to family members, then such distribution
could be considered as supply of goods under the above Entry No.4
and accordingly be chargeable to tax under the GST law.
Q75. Whether an insurance claim received by hospitals for treatment
of Insured patient is taxable under GST?
Ans. As per Section 2(1) of the CGST Act, “actionable claim” shall have
the same meaning as assigned to it in section 3 of the Transfer of
Property Act, 1882
As per Section 3 of Transfer of Property Act, 1882, “actionable
claim” means a claim to any debt, other than a debt secured by
mortgage of immoveable property or by hypothecation or pledge of
moveable property, or to any beneficial interest in moveable
property not in the possession, either actual or constructive, of the
claimant, which the Civil Courts recognise as affording grounds for
relief, whether such debt or beneficial interest be existent, accruing,
conditional or contingent
As per Schedule III to the CGST Act, actionable claim other than
lottery and gambling would be treated neither as supply of goods nor
supply of services.
Hence, any sum received under insurance claim, as actionable
claim, would not be subjected to GST.
In the present case, insurance claim received by hospitals for
treating patients may fall under the ambit of health care services and
accordingly not liable to GST vide Sl.No.74 with Chapter Heading
9993 in NN 12/2017-CTR/ Sl.No.77 with Chapter Heading 9993 in
NN 9/2017-ITR, extract of which is
Sl. Chapter, Description of Services Rate Condition
No. Section, (per
Heading, cent.)
Group or
Service Code
(Tariff)
(1) (2) (3) (4) (5)
74 Heading 9993 Services by way of- Nil Nil

62
 Supply and Levy

(a) health care services

by a clinical
establishment, an
authorised medical
practitioner or para-
medics;
(b) services provided by
way of transportation
of a patient in an
ambulance, other
than those specified
in (a) above.
…………….
(s) “clinical establishment” means a hospital, nursing home,
clinic, sanatorium or any other institution by, whatever name
called, that offers services or facilities requiring diagnosis or
treatment or care for illness, injury, deformity, abnormality or
pregnancy in any recognised system of medicines in India, or a
place established as an independent entity or a part of an
establishment to carry out diagnostic or investigative services of
diseases
….”
Q76. An online portal is charging ` 100 for booking doctor's visit.
Out of this amount, portal takes facilitation fee ` 20 and the
balance ` 80 is given to the doctor.
(a) Is the service provided by the online portal to the medical
doctor is exempted as 'health care service' as per NN
12/2017-CTR?
(b) If the service provided by the online portal to the medical
doctor is taxable, will the GST liability be on the facilitation
fees of ` 20 or ` 100 being the gross amount collected?
Ans. (a) As per NN 12/2017-CTR as amended from time to time,
services by way of -
• health care services by a clinical establishment, an
authorised medical practitioner or para-medics;
• services provided by way of transportation of a patient in an
ambulance, other than those specified in (a) above

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Practical FAQ’s under GST

are only exempted. Health care services as defined in 2(zg) of

NN 12/2017-CTR means any service by way of diagnosis or
treatment or care for illness, injury, deformity, abnormality or
pregnancy in any recognised system of medicines in India and
includes services by way of transportation of the patient to and
from a clinical establishment, but does not include hair
transplant or cosmetic or plastic surgery, except when
undertaken to restore or to reconstruct the anatomy or functions
of body affected due to congenital defects, developmental
abnormalities, injury or trauma.
The online portal is not providing service of healthcare directly.
It is merely facilitating the provision of healthcare service by the
doctors to the end patients only. Thus, the service provided by
online portal by way of facilitating booking doctor's visit is not
exempt.
(b) If the online portal is charging ` 20 as facilitation fee on each
booking, though they have collected ` 100, only the commission
of ` 20 will be chargeable to GST provided that the online portal
fulfills the criteria as a pure agent.
Q77. An unregistered educational institution sells its old school
buses after 10 years of their use. Is the sale consideration
taxable under GST?
Ans. The GST Act tries to maintain a balance whereby core educational
services provided and received by educational institutions are
exempt and other services are sought to be taxed at the standard
rate of 18%. Thus, services provided by an educational institution
to students, faculty and staff and other such core services of
an educational institution are exempt vide Sl. No. 66 of
NN 12/2017-CTR. This entry exempts only certain supplies of core
educational services and not any supply of goods. Thus all supply of
goods or any other service undertaken apart from those mentioned
in the entry shall not be covered by this exemption and will be
taxable. Sale of old school buses is a supply of goods and therefore
will be liable for tax.

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 Supply and Levy

The value of supply in case of sale of old buses will be as below -

NN 8/2018-CTR provides as under:
“(a) in case of a registered person who has claimed depreciation
under section 32 of the Income-tax Act, 1961 on any motor
vehicle, the value that represents the margin of the supplier
shall be the difference between the consideration received for
supply of such goods and the depreciated value of such goods
on the date of supply, and where the margin of such supply is
negative, it shall be ignored; and
(b) in any other case, the value that represents the margin of
supplier shall be, the difference between the selling price and
the purchase price and where such margin is negative, it shall
be ignored.”
The above notification shall not apply, if the supplier of such goods
has availed input tax credit as defined in clause (63) of section 2 of
the CGST Act, CENVAT as defined in CCR 2004 or the ITC of Value
Added Tax or any other taxes paid, on such goods. It is assumed
that the educational institution has not availed credit of tax in the
pre-GST regime. The value of supply of the old school buses shall
be determined in accordance with (b) above.
Q78. Is GST leviable on long term lease (more than 30 years) from
Gujarat Industrial Development Corporation (GIDC)?
Ans. As per Sl. No.41 of NN 12/2017-CTR as amended from time to time,
upfront amount (called as premium, salami, cost, price, development
charges or by any other name) payable in respect of service by way
of granting of long term lease of thirty years, or more of industrial
plots or plots for development of infrastructure for financial business,
provided by the State Government Industrial Development
Corporations or undertakings or by any other entity having 20% or
more ownership of Central Government, State Government, Union
territory to the industrial units or the developers in any industrial or
financial business area is exempted under GST subject to the
proviso provided therein. As long as GIDC remains as a State
Government Industrial Development Corporation, long term lease
(more than 30 years) will be an exempted service.

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Practical FAQ’s under GST

Q79. A Charitable trust running "Gaushala" sells fresh milk in

market. Will it be liable to GST?
Ans. ⚫ NN 12/2017-CTR / NN 9/2017-ITR vide Sl.No.1 exempts
services provided by entities registered under Section 12AA of
the Income-tax Act, 1961 by way of charitable activities from
GST.
• For an activity to be exempt from GST, it is essential that such
activities shall fall under the term “charitable activities’ which
has been defined in the said notification.
• However, there is no specific exemption for supply of goods by
charitable trusts. Thus, any goods supplied by such charitable
trusts for consideration, shall be liable to GST.
• In the instant case, excess fresh milk supplied by the Gaushala
in the market shall be liable to GST. However, by virtue of
Notification No.2/2017- Central Tax (Rate) dated 28.06.2017
[“NN2/2017-CTR”]/ Notification No.2/2017- Integrated Tax
(Rate) dated 28.06.2017 [“NN 2/2017-ITR”] – supply of fresh
milk is exempt from the levy of GST.
Q80. Mr. X had a factory situated in Delhi which he transferred to
Uttar Pradesh, and closed all operations in Delhi. Whether it will
constitute slump sale and whether it is liable to tax under GST?
Ans. Section 7 of the CGST Act, provides that the expression “supply”
includes all forms of supply of goods or services or both such as
sale, transfer, barter, exchange, licence, rental, lease or disposal
made or agreed to be made for a consideration by a person in the
course or furtherance of business.
Entry No. 4 (c) of Schedule II to the CGST Act refers to 'transfer of
business assets' which reads as under:
“4. Transfer of business assets
(c) where any person ceases to be a taxable person, any
goods forming part of the assets of any business
carried on by him shall be deemed to be supplied by
him in the course or furtherance of his business
immediately before he ceases to be a taxable person,
unless —

66
 Supply and Levy

(i) the business is transferred as a going concern to

another person; or
(ii) the business is carried on by a personal
representative who is deemed to be a taxable
person.”
A plain reading of the above, clarifies that the transfer of business
as a going concern shall not be treated as 'supply of goods'.
Further, Sl. No 2 of NN 12/2017-CTR/ NN 9/2017-ITR provides
exemption for "Services by way of transfer of a going concern, as a
whole or an independent part thereof” as NIL rated. Hence, the
transaction of slump sale is not liable to GST.
Q81. A temple trust receives offerings of sarees to the deity. The
trust sells such sarees to other devotees for money. Whether
GST is leviable?
Ans. As per Section 7 of the CGST Act, supply includes all forms of
supply in the course or furtherance of business.
There are few notified exemptions applicable for charitable
organisations. However, sale of goods by trust has not been covered in
any specific exemption notification.
Thus, sale of sarees by a trust to other devotees is leviable under
GST. In this regard, the relevant extract of Chapter 39 “GST on
Charitable and Religious Trusts” of Compilation of 51 GST Flyers
updated as on 1-1-2018 available on CBIC website at the link
https://goo.gl/EgAJtA, is reproduced below:
“GST on supply of goods by Charitable and Religious
Trusts: All goods, other than those specifically exempt, supplied
by any charitable or religious trust against any consideration in
any form including donation are liable to GST”.
Q82. Is GST applicable on milling of paddy into rice?
Ans. As per Circular No. 19/19/2017-GST dated 20.11.2017, milling of
paddy is not an intermediate production process in relation to
cultivation of plants. It is a process carried out after the process of
cultivation is over and paddy has been harvested. Further,
processing of paddy into rice is not usually carried out by the

67
Practical FAQ’s under GST

cultivators but by rice millers. Milling of paddy into rice also changes
its essential characteristics. Therefore, milling of paddy into rice
cannot be considered as an intermediate production process in
relation to cultivation of plants for food, fibre or other similar
products or agricultural produce.
In view of the above, it is clarified that milling of paddy into rice is
not eligible for exemption under Sl.No.55 of NN 12/2017-CTR.
Q83. Professional receipts by a Medical Practitioner exceeded ` 20
lakhs in a financial year. Will it be leviable under GST? If yes,
whether he/she is liable to take registration under GST?
Ans. GST is leviable subject to exemption.
Services provided by medical professional are supply as per Section 7
of the CGST Act. The said supply is also subject to levy under
section 9(1) of the CGST Act. However, health care services by a
clinical establishment, an authorised medical practitioner or para-
medics are exempt as per Sl. No 74 of NN 12/2017-CTR.
Further, as per section 23(1) of the CGST Act, any person exclusively
engaged in the business of supplying goods or services or both that
are not liable to tax or wholly exempt from tax is not liable for
registration.
Therefore, if the receipts by doctor is exclusively due to “services by
a clinical establishment, an authorised medical practitioner or para-
medics”, and it is exceeding ` 20 Lakhs in a financial year, then also
it will not be liable to get registration under GST.
Q84. A trust registered under section 80G of the Income Tax Act,
1961 is also registered under GST for some activities covered
under GST. The trust is conducting training programs for ladies
to make bags, purses, jewellery from beads etc. The trust is
charging normal application fees of ` 1,000 from each trainee.
Whether such application fee is chargeable to tax under GST
law?
Ans. NN 12/2017-CTR / NN 9/2017-ITR exempts services provided by an
entity registered under Section 12AA of the Income-tax Act, 1961 by
way of charitable activities from whole of GST. The relevant entries

68
 Supply and Levy

i.e. Sl. No. 1 and Sl. No. 80 of NN 12/2017-CTR [83 in case of NN

9/2017-ITR] of the notification are reproduced below:
“1. Services by an entity registered under section 12AA of the
Income-tax Act, 1961 by way of charitable activities.”
“80. Services by way of training or coaching in recreational
activities relating to-
(a) arts or culture, or
(b) sports by charitable entities registered under section 12AA
of the Income-tax Act.”
Thus, as per this notification, exemption is given to the charitable
trusts, only if the following conditions are satisfied:
(a) Entities must be registered under Section 12AA of the
Income tax Act, 1961
(b) Such services or activities by the entity are by way of
charitable activities.
The term ‘charitable activities’ has been defined in the above
Notifications as under :
“(r) “charitable activities” means activities relating to -
(i) public health by way of,-
(A) care or counseling of
(I) terminally ill persons or persons with severe
physical or mental disability;
(II) persons afflicted with HIV or AIDS;
(III) persons addicted to a dependence-forming
substance such as narcotics drugs or alcohol;
or
(B) public awareness of preventive health, family
planning or prevention of HIV infection;
(ii) advancement of religion, spirituality or yoga;
(iii) advancement of educational programmes or skill
development relating to,-

69
Practical FAQ’s under GST

(A) abandoned, orphaned or homeless children;

(B) physically or mentally abused and traumatized
persons;
(C) prisoners; or
(D) persons over the age of 65 years residing in a rural
area;
(iv) preservation of environment including watershed,
forests and wildlife;”
While only the income from those activities listed above is exempt
from GST, income from the activities other than those mentioned
above is taxable.
In the instant case, the trust is conducting training programs for
ladies to make bags, purses, jewellery from beads. The trust is
charging nominal application fee of ` 1,000 from each participant
towards such training.
If the above, activity of conducting training programs fall under
services by way of training or coaching in recreational activities
relating to arts or culture, then such application fees are not leviable
to GST. Otherwise, the same shall be construed as a commercial
activity and GST shall be applicable.
Q85. Mr. A is the owner of a property, which is given on rent for
being used as the hostel. The inmates are students and the
property is used for residential purposes. Hence, the tenant
who is administering the hostel had requested the landlord
not to charge GST, since it is exempt vide Sl.No 12 of NN
12/2017-CTR
The landlord wants to know whether the stand is correct.
Ans. (a) Sl.No. 12 of NN 12/2017-CTR provides an exemption for
‘Services by way of renting of residential dwelling for use as
residence.’ GST law has not defined the term ‘residential
dwelling’ and hence it has to be understood in the normal trade
parlance, which means any residential accommodation.

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 Supply and Levy

In the given case, the property is let out for the purpose of
hostel accommodation, which is a commercial activity.
Accordingly, the service provided by the landlord to the
management of the hostel is to undertake a commercial activity
which is taxable at the 18% rate of tax as per Notification
No.11/2017 -Central Tax (Rate) dated 28.06.2017 [“NN 11/2017-
CTR”].
(b) On the other hand, with respect to the accommodation services
provided by the hostel to the students, the same would be
covered under S. No.14 of NN 12/2017-CTR which provides
exemption for “Services by a hotel, inn, guest house, club or
campsite, by whatever name called, for residential or lodging
purposes, having declared tariff of a unit of accommodation
below one thousand rupees per day or equivalent.”
Further, the CBIC vide Circular No. 32/06/2018 - GST dated
12.02.2018[CIR 32], inter alia clarified as under:

S.No. Issue Clarification

1. Is hostel Hostel accommodation services do not
accommodation fall within the ambit of charitable
provided by Trusts activities as defined in para 2(r) of
to students covered notification No. 12/2017-C.T. (Rate).
within the definition However, services by a hotel, inn, guest
of charitable house, club or campsite, by whatever
activities and thus, name called, for residential or lodging
exempt under Sl. purposes, having declared tariff of a unit
No. 1 of notification of accommodation below one thousand
No. 12/2017-C.T. rupees per day or equivalent are exempt.
(Rate)? Thus, accommodation service in
hostels including by Trusts having
declared tariff below one thousand
rupees per day is exempt. [Sl. No. 14 of
notification No. 12/2017-C.T.(Rate)]
Even in a situation where the hostel claims an exemption under
S.No.14 as stated in Point (b) above, the landlord cannot claim an
exemption for the renting of commercial space and such rental
would remain taxable as stated in Point (a) above.

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Practical FAQ’s under GST

Q86. (a) Would GST be leviable on supplies made by a Residents'

Welfare Association (RWA) to its resident members?
(b) If so, would the exemption of ` 7500 per month be
applicable for each member or each residential apartment?
Ans. (a) Service by a residential welfare association (RWA) to its own
members by way of reimbursement of charges or share of
contribution up to an amount of ` 7500 per month (` 5000 per
month till 24 January 2018) per member for sourcing of goods or
services from a third person for the common use of its members
in a housing society or a residential complex is exempt as per
NN 12/2017-CTR as amended vide Notification No. 2/2018-
Central Tax (Rate) dated 25.01.2018.
(b) In general business sense, a person who owns two or more
residential apartments in a housing society or a residential
complex shall normally be a member of the RWA for each
residential apartment owned by him separately. The ceiling of
` 7500/- per month per member shall be applied separately for
each residential apartment owned by him.
For example, if a person owns two residential apartments in a
residential complex and pays ` 15000/- per month as maintenance
charges towards maintenance of both apartments to the RWA
(` 7500/- per month in respect of each residential apartment), the
exemption from GST shall be available to each such payment.
This has been clarified in Circular No. 109/28/2019- GST dated
22.07.2019.
Q87. Please throw some light on GST implications on Electricity
Generation and Distribution Companies.
Ans. Apart from electricity charges, there are various other types of
incomes earned by Electricity Generation and Distribution
Companies and the taxability of such income are briefed below:
(a) It is pertinent to note that 'electricity' and 'electrical energy'
conveys the same meaning and message as per section 2(23)
of Electricity Act, 2003. Electricity is covered as ‘Electrical
Energy’ under goods category with HSN Code 27160000 of the
Customs Tariff Act, 1975 and the supply of such electricity is

72
 Supply and Levy

exempted vide Sl.No. 104 of NN 2/2017-CTR/ NN 2/2017-ITR.

(b) Transmission or distribution of electricity by an electricity
transmission or distribution utility is exempt vide at Sl.No. 25
(SAC 9969) of NN 12/2017-CTR as amended/ Sl.No. 26 (SAC
9969) of NN 9/2017-ITR as amended.
(c) Electricity distribution services, by other than electricity
transmission or distribution utility which is exempted vide (b)
above, is taxable vide Sl.No.13 (SAC 9969) of NN 11/2017-CTR
/ NN 8/2017-ITR as amended at the rate of 18% GST (CGST
9% & SGST 9%).
(d) Services supplied by electricity distribution utilities by way of
construction, erection, commissioning, or installation of
infrastructure for extending electricity distribution network up to
the tube well of the farmer or agriculturist for agricultural use is
also exempted with certain conditions vide Sl.No.10A (SAC
9954) NN 12/2017-CTR as amended/ Sl.No.11A (SAC 9954)
NN 9/2017-ITR as amended.
(e) Supply of support services to electricity distribution is taxable @
18% GST (CGST 9% & SGST 9%) vide Sl.No. 24(iii) (SAC
9986) of NN 11/2017-CTR/ NN 8/2017-ITR as amended.
(f) In this context, it is also pertinent to draw reference to
S.No.4(1) of the Circular No. 34/8/2018-GST dated 1.03.2018,
wherein the following clarification is provided:
‘Service by way of transmission or distribution of electricity by
an electricity transmission or distribution utility is exempt from
GST under Notification No. 12/2017- CT (R), Sl. No. 25. The
other services such as, -
i. application fee for releasing connection of electricity;
ii. rental charges against metering equipment;
iii. testing fee for meters/ transformers, capacitors etc.;
iv. labour charges from customers for shifting of meters
or shifting of service lines;
v. charges for the duplicate bill;
provided by DISCOMS to consumer are taxable.’

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Practical FAQ’s under GST

(g) However, in the case of Torrent Power Ltd. v. Union of India ,

W.P. No. 5343 of 2018, decided on 19-December-2018, the
Gujarat High Court has quashed the taxability of the afore
mentioned five services stated in the circular, since it is ultra vires
the provisions of section 8 of the CGST Act as well as Sl.No. 25 of
NN 12/2017-CTR dated 28.6.17 as amended.
The High Court has given a verdict that the charges such as
application fee, meter rent, testing fee, etc. collected by the
petitioners are part of the composite supply of which
principal supply is the actual supply of electricity.
Therefore, the entire composite supply is exempt from tax
as per the said Notification entry.
Q88. An agency participates in an event held outside India and on
behalf of the participants booked stalls in that event. While the
billing is made by the agency to participants, whether GST will
be charged on stall booking expenses or it is exempt under
GST citing the benefit extended by NN 12/2017-CTR?
Ans. To answer the above query, the activity has to pass through the
following tests:
(a) Test of principal-agent relationship: In the case of such a
booking agency, the important test to be carried out is to
evaluate the existence of the principal-agent relationship. In
this context, Circular No. 57/31/2018-GST dated 4.09.2018 has
clarified, the scope of principal-agent relationship in the context
of Schedule I of the CGST Act. Though the said circular has
been issued to clarify the position in the case of a supply of
goods, reference can still be drawn to understand the existence
of principal-agent relationship in a larger perspective even in
the given case of a supply of service. The crucial factor is how
to determine whether the agent is wearing the representative
hat. The key ingredient in determining the relationship under
GST would be the invoice, the nature of billing and the nature
of the booking. If the agent books slots in bulk and sells
individual slots to various customers, then the transaction
would be on principal to principal basis or otherwise.

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 Supply and Levy

(b) Pure agent supply: Rule 33 of the CGST Rules, prescribes the
value of supply of services in case of the pure agent [Please
refer Q184 for Rule 33 as reproduced there].
In the instance case, the agent is billing for the stall booking
expenses to the participant and this appears to be a principal
activity. Besides the above, the transaction is not in the nature
of mere reimbursement and hence the provisions of pure agent
would not be applicable.
(c) Nature of Supply: The next test would be to evaluate whether
the said transaction qualifies as export of service. A transaction
to qualifies an export of service 5 conditions stipulated under
section 2(6) of the IGST Act should be satisfied.
“export of services” means the supply of any service when, -
(a) the supplier of service is located in India;
(b) the recipient of service is located outside India;
(c) the place of supply of service is outside India;
(d) the payment for such service has been received by the
supplier of service in convertible foreign exchange or in
Indian rupees wherever permitted by the Reserve Bank
of India; and
(e) the supplier of service and the recipient of service are
not merely establishments of a distinct person in
accordance with Explanation 1 in section 8;
The supply of booking services rendered by the agent to the
participants would not qualify as export of service since both the
supplier agent as well as the recipient participant are located in
India and the consideration is in INR.
(d) Taxability and exemption evaluation:
▪ Sl.No. 52 of NN 12/2017-CTR, provides exemption for
‘Services by an organiser to any person in respect of a
business exhibition held outside India’
▪ In the given scenario, the supplier is not the organizer of the
exhibition, but a booking agent and hence, the said
exemption is not applicable.

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Practical FAQ’s under GST

Based on the above analysis, it is clear that the said supply of

services of stall booking provided by the agent for the
participant is taxable under GST and the rate of tax would be
determined accordingly as per NN 11/2017-CTR, as amended
from time to time.
Rate/Classification
Q89. An assessee is supplying the services of installation of Central
Air Conditioner and fire-fighting system as a sub-contractor to
the main contractor in a Government contract. As the services
are finally provided to the Government, whether the assessee is
taxable at 12% GST or at 18%?
Ans. Amended NN 11/2017-CTR allows sub-contractor to levy tax @ 12%
as applicable to the main contractor vide Sl.No 3(ix) of the said
notification. Therefore, the rate for sub-contractor is also 12% when
services are provided to the main contractor of a Government
Contract.
Q90. A goldsmith does labour jobs @ 5%. He gets pure gold from
jewellers for labour work to manufacture gold jewellery studded
with stones. Gold smith mixes alloy (Taxable @ 3%) and some
precious stones from his side.
(a) Whether the value of supply should include alloy and cost
of stones?
(b) What is the applicable GST rate on job work services
provided by the goldsmith?
Ans (a) The job worker is undertaking two types of supplies –
(I) Supply of diamonds and alloys which will be used in
the pure gold jewelry - The job-worker purchases precious
stones and uses it in the manufacture of jewelry for the
principal. There is a transfer in title to goods (precious
stones) from the job worker to the principal and this shall be
taxable at the rate applicable to the precious stones. The
job worker shall issue a tax invoice, if registered with place
of supply as the location of the job-worker premises itself as
the goods have not left the premises of the job-worker.

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 Supply and Levy

(II) Supply of services of job-work of converting the pure

gold into jewelry – Next, the precious stones are used to
make jewelry along with the pure gold received from the
principal. Job-work is any treatment or process undertaken by
a person on goods belonging to another registered person.
The process undertaken on the pure gold will be treated as a
supply of service and liable to tax at the rate of 5% under
SAC 9988. The job worker shall raise a tax invoice for the
job work services provided, if registered in GST.
(III) Delivery of the processed goods – The job worker shall
issue a delivery challan for the supply of the processed gold
(i.e.) jewellery to the principal.
(b) The principal undertakes the following transactions
(I) Supply of pure gold to the job worker for further processing–
A delivery challan will be issued by the principal as goods
are sent for reasons other than supply.
(II) Purchase of precious stones and alloys from the job
worker – The principal will issue a delivery challan for the
precious stones purchased from the job worker and used by
the job-worker himself. The job worker shall issue a tax
invoice, if registered as explained above.
(III) Services of job-work on the pure gold– The job-worker shall
raise a tax invoice, if registered.
The supply of alloy and precious stones will not form part of the
value of job work services provided by the job-worker as it is an
independent supply undertaken by the job-worker. The supply of
the precious stones will be treated as supply of goods and the
supply of job-work services as a supply of service. The concept
of composite supply will also not be attracted as the
predominant element of the supply cannot be ascertained as the
value of the precious stones may be more than the value of the
job-work services itself.
The GST rate applicable for the job-work services will be 5%
under SAC 9988 (i)(c) as the job-work is in relation to the
gold which is covered under Chapter 71 of the Customs Tariff
Act, 1975.

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Practical FAQ’s under GST

Q91. Can a supplier charge separately, different GST rates in respect

of the freight charges relating to a supply of goods and the
goods supplied in the same invoice?
Ans. As per Section 2(30) of the CGST Act, “composite supply” means a
supply made by a taxable person to a recipient consisting of two or
more taxable supplies of goods or services or both, or any
combination thereof, which are naturally bundled and supplied in
conjunction with each other in the ordinary course of business, one
of which is a principal supply.
It is to be noted that, when goods (food, in this case) are packed and
transported with insurance., if any, the supply of goods(food), packing
materials, transport and insurance if any is a composite supply and
supply of goods (food) is treated as a principal supply.
Where transportation is provided along with the supply of goods,
then transport services are taxable at the same GST rate applicable
to the goods involved. In view of this, the supplier cannot charge
separately, different GST rates on freight charges and for the supply
of goods in same invoice.
Q92. Whether the movers and packers’ services will be covered
under transportation services or cargo handling services?
Ans. As per the Explanatory Notes to the Scheme of Classification of
Services released by Central Board of Indirect Taxes, the following
services would fall under the ambit of cargo handling services
“99671 Cargo handling services
996711 Container handling services
996712 Customs House Agent services
996713 Clearing and forwarding services
996719 Other cargo and baggage handling services”
On perusal of the above entries, it appears that the packers and
movers services do not fall under the category of cargo handling
services.
The “land transportation service”, mentions the following:
Road transport services of goods including letters, parcels, live
animals, household & office furniture, containers etc. by

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 Supply and Levy

refrigerator vehicles, trucks, trailers, man or animal drawn

vehicles or any other vehicles.
This service code includes, amongst others -
v) ancillary services, such as packing and carrying and in-house
moving;
Hence, packers and movers services would fall under the category
road transportation service falling under service Tariff Code 996511.
Export / Import
Q93. Whether the revenue rebate received from foreign supplier in
the form of lumpsum consideration (via USD) for achieving
certain milestones is supply? If yes, then is it export of service?
Ans. ⚫ Section 7 of the CGST Act provides that the expression “supply”
includes all forms of supply of goods or services or both such as
sale, transfer, barter, exchange, licence, rental, lease or
disposal made or agreed to be made for a consideration by a
person in the course or furtherance of business.
• In terms of Section 2(31) of the CGST Act, “consideration” in
relation to the supply of goods or services or both includes any
payment made or to be made, whether in money or otherwise, in
respect of, in response to, or for the inducement of, the supply
of goods or services or both, whether by the recipient or by any
other person but shall not include any subsidy given by the
Central Government or a State Government.
• Further, as per Section 15 of the CGST Act, the value of supply
includes subsidies directly linked to the price.
• In view of the above, revenue rebate received from foreign
supplier in the form of subsidy shall fall under the scope of
supply and be treated as export of services if the rebate is
received towards services exported to foreign supplier and all
other conditions of section 2(6) of the IGST Act are complied
with.
Q94. A person, who is resident of India works on a contractual basis
with a company having head quarter in USA. Will this constitute
a Supply and whether leviable under GST?

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Practical FAQ’s under GST

Ans. Assuming the service is made for a consideration and in the course
or furtherance of business, it amounts to supply.
Further, Section 13(2) of the IGST Act provides that the place of
supply of service except for the specified services in sub section (3)
to (13) shall be the location of the recipient. Hence, place of supply
in this case is USA.
Place of supply being USA, it is an inter-State supply and thereby
IGST is applicable. If the said service qualifies the conditions of
Section 2(6) of the IGST Act, which defining “Export of Service”,
then it will qualify as Zero-Rated Supply.
Q95. Whether supply made to a foreign going vessel on the Indian
Port is to be treated as export of goods / service / composite
supply?
Ans. ⚫ Export of goods is defined in section 2(5) of IGST Act “with its
grammatical variations and cognate expressions, means taking
goods out of India to a place outside India;
• Section 11(b) of the IGST Act states that the place of supply of
goods, exported from India shall be the location outside India.
• Section 88(a) of the Customs Act 1962 (“the Customs Act”)
provides that, any warehoused goods may be taken on board any
foreign going vessel as stores without payment of import duty if a
shipping bill or a bill of export has been presented in respect of
such goods in the prescribed form and the export duty has been
paid and the proper officer has passed an order for clearance of
such goods for exportation. Section 89 of the Customs Act,
provides that the goods manufactured in India and required as
stores on any foreign going vessel may be exported free of duty.
• From the above provisions it is clear that supply of goods to a
foreign going vessel is treated as export as per Customs Act.
However, as per the IGST Act, for export of goods, a relevant
criterion is that the goods must be taken to a place outside
India. Supply of goods to the vessel may not be considered as
goods taken to a place outside India. Hence, this does not
satisfy the definition of exports as per the IGST Act and hence,
cannot be treated as exports.

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 Supply and Levy

• In case imported goods are warehoused and from where

they are supplied to foreign going vessel, then the benefit of
Entry 8(a) of Schedule III of the CGST Act may be availed. As
per Entry 8(a) of the Schedule III, Supply of warehoused goods
to any person before clearance for home consumption shall be
treated neither as a supply of goods nor a supply of services.
Hence, no tax is required to be paid. However this shall not be
considered as export of goods for the reason stated above.
• In case services are supplied to foreign going vessel, the status
of export shall be decided based on the definition given for
export of services under section 2(6) of the IGST Act, which is
reproduced hereunder:
“export of services” means the supply of any service when,-
(i) the supplier of service is located in India;
(ii) the recipient of service is located outside India;
(iii) the place of supply of service is outside India;
(iv) the payment for such service has been received by the
supplier of service in convertible foreign exchange or in
Indian rupees wherever permitted by the Reserve Bank
of India; and
(v) the supplier of service and the recipient of service are
not merely establishments of a distinct person in
accordance with Explanation 1 in section 8;
• From the above definition, the key condition for services to
foreign going vessel is that the location of the recipient shall be
outside India. Location of recipient of services is defined in
section 2(14) of the IGST Act as follows:
(14) “location of the recipient of services” means, -
(a) where a supply is received at a place of business for
which the registration has been obtained, the location
of such place of business;
(b) where a supply is received at a place other than the
place of business for which registration has been
obtained (a fixed establishment elsewhere), the location
of such fixed establishment;

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Practical FAQ’s under GST

(c) where a supply is received at more than one

establishment, whether the place of business or fixed
establishment, the location of the establishment most
directly concerned with the receipt of the supply; and
(d) in absence of such places, the location of the usual
place of residence of the recipient;
• From the above definition it is clear that if foreign going vessel
has registered place of business in India or fixed establishment
in India or its usual place of residence in India then, it cannot be
considered as export of service.
• Place of supply shall be decided based on the criteria given in
section 13 of the IGST Act.
• To decide the status of export in case of composite supply, one
must identify whether the principal supply is good or service and
accordingly status of export shall be decided based on the
above discussed points.
Q96. Mr. Z is a software engineer and had obtained GST registration
by declaring his domicile as a principal place of business. He
prefers to work as a freelancer. He gets an assignment from his
clients who are located in the non-taxable territory. Further, he
used to visit the client's place to execute his professional
venture. He is remunerated in foreign currency on completion
of his job.
Whether he should charge GST for his professional work?
Ans. The above query can be answered only after examining the definition of
“export of services” and “location of the supplier of services”; under
the IGST Act.
▪ Section 2(6) of the IGST Act defines the term “export of
services” [Please refer Q 95 for definition of “export of services”]
Section 2 (15) of the IGST Act defines the term “location of the
supplier of services” as under :
“(15) “location of the supplier of services” means, -
(a) where a supply is made from a place of business for which
the registration has been obtained, the location of such
place of business;

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(b) where a supply is made from a place other than the place of
business for which registration has been obtained (a fixed
establishment elsewhere), the location of such fixed
establishment;
(c) where a supply is made from more than one establishment,
whether the place of business or fixed establishment, the
location of the establishment most directly concerned with
the provision of the supply; and
(d) in absence of such places, the location of the usual place of
residence of the supplier”
Thus, a combined reading of the above two provisions makes it amply
clear that the supply of professional services provided by Mr. Z to his
clients located outside India by visiting the foreign countries would
qualify to be an export of service.
Besides the above, the transaction qualifies as a zero-rated supply as
defined under Section 16(1) of the IGST Act and following benefits
accrue to him:
(a) As per section 16 (2) of the IGST Act, credit of input tax may be
availed for making zero-rated supplies, notwithstanding .that such
supply is an exempt supply. Provided such credit should not
form part of Negative List prescribed under section 17 (5) of the
CGST Act.
(b) As per section 16 (3) of the IGST Act, a registered person making
zero rated supply shall be eligible to claim a refund when he either
makes a supply of goods or services or both under bond or letter of
undertaking (“LUT”) or makes such a supply on payment of IGST.
Q97. Mr. A makes a design for a dress (ready to wear) and sent it to a
potential customer in United Kingdom for its approval (UK).
Design is approved by the said potential customer and ready to
wear dresses as per the approved design are made by UK
customer himself. Whether the services rendered in making the
design for dress will constitute a zero-rated supply of services
as per the GST Act?
Ans. As per Section 7(5) (a) of the IGST Act, supply of goods or services,
where the supplier is located in India and the place of supply is

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outside India shall be treated as a supply of goods or services or

both in the course of inter-State trade or commerce.
As per Section 2(6) of the IGST Act, for an activity to qualify as
export of service, all the following conditions should be met. [Please
refer Q 95 for definition of “export of services”]
Section 13 of the IGST Act, prescribes the place of supply for
various types of services, where the location of the supplier of
services or the location of the recipient of services is situated
outside India. Section 13(2) of the IGST Act provides that the
place of supply of service except for the specified services in
sub-sections (3) to (13) shall be the location of the recipient.
The services in respect of design for a dress do not fall under any of
the specific categories prescribed under Section 13 of the IGST Act.
Thus, the place of supply of services in respect of design for a dress
shall be outside India.
As per Section 16(1) of the IGST Act, export of goods or services or
both shall be treated as zero rated supply.
When other stipulated conditions mentioned in Section 2(6) of the
IGST Act, are met, the supply of services relating to design for a
dress by Mr. A to a potential customer in UK can qualify as export of
services and hence, constitute a zero rated supply,
Q98. Whether consideration received by an artist, registered under
GST law, for performing his artistic event outside India is
taxable?
Ans. As per Section 7(5) (a) of the IGST Act, supply of goods or services,
where the supplier is located in India and the place of supply is
outside India, shall be treated as a supply of goods or services or
both in the course of inter-State trade or commerce.
As per Section 2(6) of IGST Act, for an activity to qualify as export of
service, all the following conditions should be met. [Please refer
Q 95 for definition of “export of services”]
Section 13 of the IGST Act, prescribes the place of supply for
various types of services, where the location of the supplier of
services or the location of the recipient of services is situated

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outside India. The general rule is that the place of supply shall be
the location of the recipient of service unless otherwise specifically
prescribed in any one of the sub sections of section 13.
Section 13(2) of the IGST Act provides that the place of supply of
service, except for the specified services in sub-sections (3) to (13),
shall be the location of the recipient
Section 13(5) of IGST Act prescribes the place of supply of services
in respect of events conducted. It states that the place of supply of
services supplied by way of admission to, or organisation of a
cultural, artistic, sporting, scientific, educational or entertainment
event, or a celebration, conference, fair, exhibition or similar events,
and of services ancillary to such admission or organisation, shall be
the place where the event is actually held.
Thus, place of supply for performance of artist which is a pre-
requisite for conducting an event can be said to be the place where
the event is actually conducted.
Where the other conditions stipulated in Section 2(6) of the IGST
Act, are met, the performance by an artist outside India can qualify
as export of services and hence would constitute a zero-rated
supply.
Q99. Whether export of consultancy services to World Bank taxable
under GST?
Ans. ⚫ In term of Section 2(6) of the IGST Act, “export of services”
means the supply of any service when, -
(i) the supplier of service is located in India;
(ii) the recipient of service is located outside India;
(iii) the place of supply of service is outside India;
(iv) the payment for such service has been received by the
supplier of service in convertible foreign exchange [or in
Indian rupees wherever permitted by the Reserve Bank of
India]; and
(v) the supplier of service and the recipient of service are not
merely establishments of a distinct person in accordance
with Explanation 1 in section 8;”

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Practical FAQ’s under GST

• In terms of Section 16(1) of the IGST Act, export of goods or

services or both are considered as zero-rated supplies.
• In terms of Section 13(2) of IGST Act, the place of supply of
services, where the location of the supplier of services or the
location of the recipient of services is outside India, shall be the
location of recipient of services.
• Services provided to World Bank outside India are not covered
under the Exemption Notification.
• In the instant case, consultancy services provided to World
Bank shall be treated as zero rated supplies, if the export
conditions are satisfied and the place of such supply shall be
the location of World Bank.
Q100. An exporter in order to hedge his sales is entering into opposite
transaction in international commodities exchange. This service
is received from foreign agents registered with foreign
commodities exchange. The account is settled at periodic
intervals, which includes the agent’s charges. What are the GST
implications?
Ans. ⚫ In term of Section 2(52) of the CGST Act, “goods” means every
kind of movable property other than money and securities but
includes actionable claim, growing crops, grass and things
attached to or forming part of the land which are agreed to be
severed before supply or under a contract of supply.
• It is pertinent to analyse the charges given to agents of
international commodity exchange. This is relevant because of
the question whether GST is to be paid on reverse charge basis
if it amounts to import of services. The same is analysed as
follows:
o Agency services are covered in the definition of
“intermediary” which means a broker, an agent or any other
person, by whatever name called, who arranges or
facilitates the supply of goods or services or both, or
securities, between two or more persons, but does not
include a person who supplies such goods or services or
both or securities on his own account;

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o As per section 2(11) of the IGST Act

“import of services” means the supply of any service,
where-
(i) the supplier of service is located outside India;
(ii) the recipient of service is located in India; and
(iii) the place of supply of service is in India;
o Since the agent is also engaged in supply of service in the
form of arranging or facilitating the supply of securities,
such agent can be construed as “Intermediary “and thereby
in terms of section 13(8) of the IGST Act, place of supply in
the case of intermediary service is “Location of supplier”. In
this case, since agent is located outside India, the place of
supply shall be outside India.
o In the given example, though two parameters as given in
the definition of import of services are satisfied viz., location
of supplier is outside India and location of recipient of
service is in India, the third condition is not satisfied. i.e.,
place of supply should be in India. In the given case since
place of supply is outside India, this does not amount to
import of service and hence no GST is payable on the
charges paid to foreign agents.
▪ In the FAQs published by CBIC on 27.12.2018, following FAQ
(No 34) is relevant to the given case:
S.No. Question Answer
34. Whether a Section 2(101) of the CGST Act,
‘derivative’ is 2017 provides that ‘securities’ shall
included within have the same meaning as
the meaning of assigned to it in clause (h) of
‘securities’ in Section 2 of the Securities
Section 2(101) of Contracts (Regulation) Act, 1956
CGST Act, 2017 (SCRA). ‘Derivatives’ are included
and whether in the definition of ‘securities’ under
derivatives are Section 2(h)(ia) of the SCRA. In
liable to GST? terms of Section 2(ac) of SCRA,
“derivatives” includes —
(A) a security derived from a debt

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Practical FAQ’s under GST

instrument, share, loan,

whether secured or
unsecured, risk instrument or
contract for differences or any
other form of security;
(B) a contract which derives its
value from the prices, or index
of prices, of under-lying
securities.
The definition of ‘derivatives’ in
SCRA is an inclusive definition. As
‘derivatives’ fall in the definition of
securities, they are not liable to
GST. However, if some service
charges or service fees or
documentation fees or broking
charges or such like fees or charges
are charged, the same would be a
consideration for provision of
service and chargeable to GST.

From the above FAQ it is clear that transaction in derivative fall

in the definition of ‘securities’. Securities are neither covered in
the definition of goods nor in the definition of services. Hence,
they are not liable to GST.
Q101. An actor, who is non-resident and not registered in India but an
Indian citizen, comes to India for 90 days and provides services
in India for an entertainment programme. Whether the same
should be considered as “import of services”?
Ans. As per section 2(77) “non-resident taxable person” means any
person who occasionally undertakes transactions involving supply of
goods or services or both, whether as principal or agent or in any
other capacity, but who has no fixed place of business or residence
in India.
As such the actor will be treated as non-resident taxable person and
shall be liable for compulsory registration in terms of section 24(v) of
the CGST Act.

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 Supply and Levy

Further as defined in section 2(11) of the IGST Act: ‘‘import of services”

means the supply of any service; and not; where––
(i) the supplier of service is located outside India;
(ii) the recipient of service is located in India; and
(iii) the place of supply of service is in India;
In the instance case, the actor being required to take compulsory
registration in India, the location of supplier shall be in India and
hence the supply of service by the actor will not fulfil the condition of
section 2(11)(i) of the IGST Act to be an import of service.
Thus, the supply will not be treated as import of service.
Q102. XYZ Ltd. provides accounting services online from Chennai to a
client in USA. Whether such services are liable to tax under
GST?
Ans. The accounting services provided online from Chennai to a client in
USA for a consideration and in the course or furtherance of business,
amounts to supply and hence is liable to GST.
With respect to place of supply of services, section 13(2) of the
IGST Act is the section that needs to be referred.
Section 13(2) of the IGST Act provides that the place of supply of
service, except for the specified services in sub-sections (3) to (13),
shall be the location of the recipient.
Place of supply being USA, it is an inter-State supply and export of
services. It will be a zero-rated supply provided it satisfies the following
prescribed conditions.
(a) The payment for such service has been received by the supplier of
service in convertible foreign exchange or in Indian Rupees
wherever permitted by the RBI - within a period of 1 year and
15 days from the date of export invoice (Including Nepal or
Bhutan).
(b) The supplier of service and the recipient of service are not
merely establishments of a distinct person in accordance with
Explanation 1 in section 8.

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Practical FAQ’s under GST

Q103. M/s. X Ltd is in the business of providing support services (say

management, accounting and processing of transactions,
operational or administrative assistance services, etc.) from
taxable territory to its clients located in non-taxable territory.
They issue invoice for the services provided in foreign
convertible currency and the payment is received accordingly.
Whether the transaction illustrated above is subject to GST?
Ans: As per sub-section (5) of section 7 of the IGST Act, the activity
would be “inter-State supply” when the following conditions are
satisfied:
➢ the supplier is located in India.
➢ the place of such supply as per section 13 is outside taxable
territory.
In the given query, the supplier M/s. X Ltd is incorporated in India
and hence, the location of the supplier is in India and qualifies the
first rudiment in the clause. However, with respect to the second,
support service (when performed on principal to principal basis) the
place of supply as per section 13 of the IGST Act is the location of
the receiver (i.e. non-taxable territory). Hence, the transaction is
subject to IGST.
It is pertinent to note that, if the transaction satisfies the 5 conditions
stipulated under section 2(6) of the IGST Act, it will qualify to be an
export of service and accordingly will be get classified as “zero-rated
supply “as per section 16(1) of the IGST Act. [Please refer Q 95 for
Section 2(6) of IGST Act].
As per section 16(2) of the IGST Act, credit of input tax may be
availed for making zero-rated supplies, notwithstanding that such
supply is an exempt supply provided such credit should not form the
part of negative list prescribed under section 17 (5) of the CGST Act.
Further, as per section 16 (3) of the IGST Act, a registered person
making zero rated supply shall be eligible to claim a refund when he
either makes a supply of goods or services or both under bond or
LUT or makes such a supply on payment of IGST.

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Q104. Whether the services of an intermediary located in India

provided to a person in India as well as outside India will be
exigible to tax? If, yes what is the nature of supply?
Ans. ⚫ As per Section 2 (13) of the IGST Act, “intermediary” means a
broker, an agent or any other person, by whatever name called,
who arranges or facilitates the supply of goods or services or
both, or securities, between two or more persons, but does not
include a person who supplies such goods or services or both or
securities on his own account.
Thus, an intermediary is a person who merely arranges or
facilitates supply of goods or services or both, belonging to the
other person. A person can arrange or facilitate supply of goods
or services belonging to some other person (‘principal’), only
when he has been authorized by the principal. An intermediary
cannot alter the nature or value of supply, which he facilitates
on behalf of his principal. The intermediary service providers
generally receive consideration in the form of commission or
brokerage in respect of the services rendered by them.
However, the person who supplies goods or services or both on
his own account (on principal-to-principal basis) is not an
intermediary. Thus, services of an intermediary will be covered
by the definition of supply and will be liable to tax depending
upon the place of supply of such services.
⚫ To understand whether the services of an intermediary located
in India is liable to tax, the following situations as given in the
table below may arise:

Sr. Principal Intermediary Client of

No. (Service (Service Principal
recipient) Provider)
1 In India In India In India
2 In India In India Outside India
3 Outside India In India In India
4 Outside India In India Outside India

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Practical FAQ’s under GST

⚫ Place of Supply - To determine the nature of supply of

intermediary service, the place of supply needs to be
determined first. In this query, the intermediary is located in
India and is rendering service to a principal located in India as
well as outside India as covered by situation no. 1 - 4 in the
above table. As far as situation no. 1 and 2 is concerned, the
supplier and the recipient are in India and therefore place of
supply will be determined as per Section 12 of the IGST Act. As
per Section 12, the place of supply will be the location of the
registered recipient and in case of recipient, other than the
registered person it shall be the location of the recipient where
the address on record exists. Thus, the place of supply shall be
the location of the recipient (i.e.) Location of Principal, India.
The place of supply for situation no. 3-4 will be determined as
per the provisions of Section 13 of the IGST Act. Section 13
deals with place of supply of services where location of the
supplier or location of the recipient is outside India. In terms of
Section 13(8)(b) of the IGST Act, the place of supply of
'intermediary services' shall be the location of the supplier of
services (i.e., location of intermediary). Consequently, if the
supplier meets the definition of an intermediary, then such
services would not qualify as an export of services in terms of
Section 13(8)(b) of the IGST Act.
⚫ Nature of Supply - To understand the nature of supply, Section
8(2) of the IGST Act needs to be referred to. Section 8 deals
with the provisions in respect of supply of goods or services or
both in the course of intra-State trade or commerce, i.e., trade
or commerce within the State. The relevant portion of the
section reads as below –
“(2) Subject to the provisions of section 12, supply of
services where the location of the supplier and the place of
supply of services are in the same State or same Union
territory shall be treated as intra-State supply:”
⚫ The provision of Section 8(2) is subject to the provisions of
Section 12. The provisions of Section 8 have to be read
alongside provisions of Section 12 and whenever a conflict

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arises, Section 12 shall prevail over the provisions of Section 8.

In the instant case as discussed above, the location of supplier
is in India and the place of supply is also in India only and
therefore, the nature of supply shall be intra-state supply and
liable for CGST + SGST for all situations.
⚫ There has been an ambiguity in determining the nature of supply
in case the location of supplier of service is in India and the
location of recipient of service is outside India. The CBIC vide
its FAQ has clarified that in case of location of supplier and
place of supply falling within the same State/UT, then it will be
treated as an intra-state supply only. FAQ 64 through Tweets.
“Question - If address of buyer is Punjab and place of
supply is same state of supplier (Rajasthan), then IGST will
apply or CGST/SGST?
Reply - If the place of supply and the location of the
supplier are in the same State then it will be intra-State
supply and CGST / SGST will be applicable.”
⚫ Sr. No 25 of the Frequently Asked Questions on Banking,
Insurance and Stock Brokers Sector dated 27.12.2018
“Question - Would intermediary services provided to an
offshore client and services provided by banking company
to its offshore account holders be treated as an intra-State
supply or an inter-State supply for payment of GST?
Answer - Under clause (b) of section 13(8) of the IGST Act,
2017 the place of supply of such services is the location of
the provider of services. As the location of supplier and
place of supply are in same State, such supplies will be
treated as intra-State supply and Central tax and State tax
or Union territory tax, as the case may be, will be payable."

Q105. Whether an importer of services is liable to pay tax on reverse

charge basis under GST law?
Ans. As per Section 7(1) (b) of the CGST Act, supply includes import of
services for a consideration whether or not in the course or
furtherance of business.

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Entry No. 4 of Schedule I of the CGST Act, stipulates that “Import of

services by a person from a related person or from any of his other
establishments outside India, in the course or furtherance of
business” Hence, supply of services imported into the territory of
India shall be treated to be a supply of services in the course of
inter-State trade or commerce.
Further, as per Section 13 of the IGST Act, unless otherwise
specifically prescribed, the place of supply of services where
location of supplier or location of recipient is outside India, shall be
the location of recipient of the service.
Section 7(4) of IGST Act, states that supply of services imported into
the territory of India shall be treated to be a supply of services in the
course of inter-State trade or commerce.
Also as per NN 10/2017-ITR, any services supplied by any person
located in non-taxable territory to a person located in taxable
territory shall be liable to reverse charge.
On the basis of the above aspects of GST law, in the instant case
the import of service is leviable to GST under reverse charge.
Q106. If an Indian Company has representative office abroad as per
RBI approval and the overseas office provides certain services
to the Indian Company, whether such supply is chargeable to
GST?
Ans. In terms of Sl.No.1 of Notification No. 10/2017- Integrated (Rate)
dated 28.06.2017 [“NN 10/2017-ITR”], GST shall be payable under
reverse charge mechanism (“RCM”) towards any service supplied by
any person who is located in a non-taxable territory to any person
located in the taxable territory other than non-taxable online
recipient.
Further, as per Entry No.4 of Schedule I to the CGST Act, import of
services by a person from a related person or from any of his other
establishments outside India, in the course or furtherance of
business shall be treated as supply even if made without
consideration.
In view of the above, GST shall be payable by the Indian company
under RCM towards services provided by its representative office
located abroad (related person).

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 Supply and Levy

Q107. An importer, who imported goods from non-taxable territory,

receives credit note for discounts from the supplier. Whether
the importer is liable to any tax on receipt of discounts in credit
note issued by the supplier?
Ans: ⚫ The act of bringing goods into India is covered by the definition
of “import of goods” as prescribed in sub-section (11) of
section 2 of the IGST Act. Further, as per sub-section (2) of
section 7 of the IGST Act it is classified as a supply of goods in
the course of inter-State trade/commerce and would be liable to
integrated tax under GST Act. Besides the above, proviso to
section 5 (1) of the IGST Act supplements that, the integrated
tax on goods imported into India shall be levied and collected in
accordance with the provisions of section 3 of the Customs
Tariff Act, 1975 on the value as determined under the said Act
at the point when duties of customs are levied on the said goods
under section 12 of the Customs Act.
From the above discussion, we can infer that on such importation
of goods, IGST will be payable in addition to the basic customs
duty (BCD). Accordingly, the point to determine the rate of duty
and conversion rate (i.e. value of goods) of Imported goods are
governed by section 15 of Customs Act [which is latest of either
dates i.e. date of presentation of bill of entry; or date of entry
inwards of the vessel or date of arrival of aircraft or vehicle].
Hence, the point at which the customs duties are levied on the
import of goods would also be the point when integrated tax is
levied.
• Post import price changes are not relevant for the purpose of
valuation. Hence, if there is any reduction in the value of
imported goods due to discounts and incentives by way of a
credit note issued subsequently by the overseas supplier, such
reduction would not have any impact on the tax payable under
the Customs Act and thus the value of IGST payable/paid
remains unchanged.
• The importer, subject to restrictions under section 17(5) of the
CGST Act, is also eligible to avail ITC on such IGST charged on
import of goods by virtue of it being covered by the definition of
‘input tax’ under section 2(62) thereof. Such ITC once availed

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Practical FAQ’s under GST

based on the IGST discharged under the Customs Act would

remain unchanged, even in the case of subsequent reduction in
the import value.
• However, with respect to such credit notes, it is pertinent to
evaluate whether it is in the nature of discount towards the
original supply (i.e. supplementary transaction) or whether such
discount is like incentive for a separate supply of services
provided by the importer to the exporter (i.e. principal
transaction).
If the discount is given by the overseas supplier of goods to the
importer for performing an act not connected to goods imported
[Schedule II of the CGST Act], then such activity would be
considered as a principal transaction for consideration and
hence it is a supply. Eventually, the importer of goods would be
the supplier of services.
In such a scenario, it is pertinent to test, if such a supply
of service would qualify to be an export of service under
section 2(6) of the IGST Act [Please refer Q 95 for definition of
“export of services”]
Accordingly, even in a situation where such discount / incentive /
credit note is in the form of an independent supply of services and
not merely discount related to the original importation of goods, the
condition stipulated above needs to be checked.
If the transaction satisfies the afore mentioned 5 conditions of
section 2(6) of the IGST Act, it qualifies to be an export of service
and in turn would be classified as a zero-rated supply as defined
under section 16 of the IGST Act. Further, the benefit of zero-rated
supply accrues to the importer, who is to supply either with
payment of tax and apply for a refund of the said payment or
execute the LUT for supply without payment of tax and claim the
refund of accumulated ITC.
However, if the transaction fails to satisfy the afore-mentioned
5 conditions of section 2(6) of the IGST Act, the same shall be
taxable under GST as a supply of service at the applicable rate.

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 Supply and Levy

Q108. Why has import of goods not been specified in section 7 of the
CGST Act?
Ans. Explanation to Article 269A (1) to the Constitution inserted by
Constitution (101st Amendment) Act 2016, inter alia stated: “For the
purposes of this clause, supply of goods, or of services, or both in
the course of import into the territory of India shall be deemed to be
supply of goods, or of services, or both in the course of inter-State
trade or commerce”. Hence provisions related to import of goods are
contained in the IGST Act.

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 Chapter 2
Composite or Mixed Supply
Q109. A person supplies flour in a bag along with one additional
plastic container. Does this constitute composite supply?
Ans. The definition of composite supply as provided in section 2(30) of
the CGST Act, itself gives a statutory illustration as follows:
“composite supply” means a supply made by a taxable person to
a recipient consisting of two or more taxable supplies of goods
or services or both, or any combination thereof, which are
naturally bundled and supplied in conjunction with each other in
the ordinary course of business, one of which is a principal
supply;
llustration: Where goods are packed and transported with
insurance, the supply of goods, packing materials, transport and
insurance is a composite supply and supply of goods is a
principal supply.”
From the above illustration it is clear that packing materials
constitute ancillary supply of composite supply. One important point
to note here is that the statutory illustration does not restrict its
applicability to secondary packing materials. The purpose of giving
plastic container along with flour bag is to store the flour in the
container. Hence, the same shall be considered as ancillary supply
and the rate applicable for the flour shall be applied for the entire
price charged.
Q110. A developer while rendering construction services also collects
charges towards preferential location (in terms of pool facing,
park facing, corner, first floor, top floor, vastu compliant flat
etc.), right to use car parking space, legal charges, common
area charges, club house charges etc., Can the entire
consideration be treated as composite supply and can
construction services be regarded as principal supply? Or this
is to be treated as mixed supply and that supply which attracts
higher rate is to be considered?

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 Composite or Mixed Supply

Ans. I. It is a common practice in construction industry to provide

services like preferential locations, right to use car parking
space, common area maintenance, legal charges etc., along
with construction services for a flat. For the entire bundle of
services single consolidated price is charged from the recipient.
Generally one agreement is entered which covers the entire
services.
II. It is also to be noted that while offering entire bunch of services,
option is given to the receivers not to pay for some or all of the
services given and reduction from consolidated single price is
given. For example a buyer may opt not to pay for right to use
car parking space, preferential locations etc.
III. In the above context following questions are raised:
a. Whether entire bundle can be taken as construction service
treating the same as principal supply in the composite
supply? or
b. Whether entire bundle is treated as mixed supply and rate
applicable for other services being 18% shall be applicable
for the entire services including for construction?
IV The definitions of ‘composite supply’ and ‘principal supply’ are
reproduced hereunder:
“composite supply means a supply made by a taxable person
to a recipient consisting of two or more taxable supplies of
goods or services or both, or any combination thereof, which
are naturally bundled and supplied in conjunction with each
other in the ordinary course of business, one of which is a
principal supply” – [Section 2(30)]
“principal supply means the supply of goods or services which
constitutes the predominant element of a composite supply
and to which any other supply forming part of that composite
supply is ancillary” - [Section 2(90)]
“mixed supply means two or more individual supplies of
goods or services, or any combination thereof, made in

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conjunction with each other by a taxable person for a single

price where such supply does not constitute a composite
supply.” - [Section 2(74)]
V To identify a particular supply to be of composite supply, the
important ingredient is, it must be naturally bundled. The
concept of natural bundling is not defined in GST Act. However,
CBIC in its GST flyer on “composite supply and mixed supply”
issued following guidelines on how to identify whether natural
bundling exists in a supply or not:
“Whether services are bundled in the ordinary course of
business would depend upon the normal or frequent practices
followed in the area of business to which services relate.
Such normal and frequent practices adopted in a business
can be ascertained from several indicators some of which are
listed below:
• The perception of the consumer or the service receiver. If
large number of service receivers of such bundle of
services reasonably expects such services to be provided
as a package, then such a package could be treated as
naturally bundled in the ordinary course of business.
• Majority of service providers in a particular area of
business provide similar bundle of services. For example,
bundle of catering on board and transport by air is a
bundle offered by a majority of airlines.
• The nature of the various services in a bundle of services
will also help in determining whether the services are
bundled in the ordinary course of business. If the nature of
services is such that one of the services is the main
service and the other services combined with such service
are in the nature of incidental or ancillary services which
help in better enjoyment of a main service. For example,
service of stay in a hotel is often combined with a service
or laundering of 3-4 items of clothing free of cost per day.
Such service is an ancillary service to the provision of
hotel accommodation and the resultant package would be

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 Composite or Mixed Supply

treated as services naturally bundled in the ordinary

course of business.
• Other illustrative indicators, not determinative but
indicative of bundling of services in ordinary course of
business are –
─ There is a single price or the customer pays the same
amount, no matter how much of the package they
actually receive or use.
─ The elements are normally advertised as a package.
─ The different elements are not available separately.
─ The different elements are integral to one overall
supply – if one or more is removed, the nature of the
supply would be affected.
“No straight jacket formula can be laid down to determine
whether a service is naturally bundled in the ordinary course
of business. Each case has to be individually examined in the
backdrop of several factors some of which are outlined
above.”
The above principles explained in the light of what constitutes a
naturally bundled service can be gainfully adopted to determine
whether a particular supply constitutes a composite supply
under GST and if so, what constitutes the principal supply so as
to determine the right classification and rate of tax of such
composite supply.”
➢ When guidance from above flyer is used, following points
emerge in the context of queries raised above:
o The intention of receivers is relevant – The dominant
intention of receiver is to receive construction service and
not the other ancillary services provided. Even though the
receiver is given an option to choose the services, it can be
argued that other services viz., PLC, legal services, right to
use car parking space cannot be availed by him
independently.

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o It is a common practice in construction industry to offer the

above (PLC, legal service services etc.,) along with
construction services and it can be said that all these
services are naturally bundled with construction services
and supplied in conjunction with one another in the ordinary
course of business.
o One may argue that since other services are optional it is
not naturally bundled. It is important to consider a point
here; the recipient agreeing to receive these services as a
bundle, cannot enjoy the other services unless he agrees to
buy the services of constructing the allotted dwelling unit.
That is to say one cannot buy other services such as right
to use car parking space or society maintenance charge or
any other service in the bundle separately. The recipient
must buy these services only as a package, where the
construction service remains the predominant element.
➢ Similar to the concept of composite supply, in erstwhile service
tax regime the concept of bundling service was envisaged in
section 66F of Chapter V of Finance Act, 1994. Many rulings under
the service tax have upheld the above view.
➢ In M/s. SJP Infracon Limited v. The Commissioner of Central
Excise & Service Tax, Noida, CESTAT Allahabad [2018 (12)
TMI 253 - Appeal No. ST/70343/2018-CU(DB)] has made the
following observations:
“it is undisputed fact that the sale deed does not separately
mention above stated charges and the sale deeds are
for the amount of entire consideration including above
stated charges. We, further, note that provisions under
sub section (3) of section 66F has provided that whenever in
ordinary course of business some service is naturally
associated with a single service which gives essential
character to the entire package of service then such naturally
associated service is treated as bundled service and the said
bundled service is to be treated as single service which gives
the entire package its essential character. In the present case
construction of residential complex service is the service

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 Composite or Mixed Supply

which gives essential character to the package of the service

and, therefore, the charges as stated above are essentially
required to be bundled with the single service namely
construction of residential complex service. We, therefore, do
not find any merit in the stand taken by Revenue.”
➢ Same view was expressed in the following cases too:
▪ Logix Infrastructure Pvt. Ltd., Shree Chetan Sharma Vice
President, Shri Sawan Kumar Manager (Taxation), Shri
Sameer Satija, DGM (Accounts) v. Commissioner of
Central Excise & S.T., NOIDA [2018 (11) TMI 462]
▪ M/s Radhey Krishna Technobuild (P) Ltd. v. Commissioner,
Central Excise, Lucknow [2020 (2) TMI 37]
▪ M/S KLJ Developers Pvt. Limited v. CE, C & CGST, DELHI-
III [2018 (7) TMI 1444]- CESTAT NEW DELHI
Based on the above discussions, it can reasonably be concluded
that entire bundle is to be taxed at the rate applicable to construction
service which is the principal supply and other services are nothing
but the ancillary supplies.
Q111. Would the answer to Q No.110 be different, in case the builder
sells furnished apartments and also collects charges as
mentioned above?
Ans. It is possible that a builder may sell a completed building along with
other services. The flat is also fully furnished. In this case, following
are supplied as a bundle
• Sale of furnished flat
• Services such as right to use car parking space, preferential
location etc.,
In the above context, the pre-dominant intent in the minds of the
receiver would be to buy the furnished building. It is general
practice in the industry to offer entire service as a bundle. As
discussed in the case of construction service in the answer to
Q No.120 it is not possible for the receiver to enjoy the allied
services separately. Hence, the principal supply is to be taken
as sale of furnished building.

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Q112. A supplier is involved in the business of flex printing. Content

to be printed is supplied by the recipient. The supplier uses his
own materials based on the specification of the recipient and
supplies the service of printing and finally issues flex board as
advertising material. Whether this is treated as composite
supply or mixed supply?
Ans. ⚫ The Board has clarified on the issue of classification in printing
industry vide Circular No 11/11/2017-GST dated 20.10.2017.
Important excerpts of the circular are reproduced hereunder:
“Para 4. In the case of printing of books, pamphlets,
brochures, annual reports, and the like, where only content is
supplied by the publisher or the person who owns the usage
rights to the intangible inputs while the physical inputs
including paper used for printing belong to the printer, supply
of printing [of the content supplied by the recipient of supply]
is the principal supply and therefore such supplies would
constitute supply of service falling under Heading 9989 of the
scheme of classification of services.
Para 5. In case of supply of printed envelopes, letter cards,
printed boxes, tissues, napkins, wall paper etc. falling under
Chapter 48 or 49, printed with design, logo etc. supplied by
the recipient of goods but made using physical inputs
including paper belonging to the printer, predominant supply
is that of goods and the supply of printing of the content
[supplied by the recipient of supply] is ancillary to the principal
supply of goods and therefore such supplies would constitute
supply of goods falling under respective headings of under
Chapter 48 or 49 of the Customs Tariff.”
• Supply of material and activity of printing both together
constitute supply of trade advertisements in this case. There is
no doubt that the contract is of composite supply due to the
following reasons:
o It is naturally bundled because it is the general practice in
printing industry to provide both PVC flex material and
service of printing as a bundle. These elements are

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 Composite or Mixed Supply

normally given as a package. Large number of customers in

the industry expects these to be given as a package.
• It is essential to identify the principal supply. Analysis of Board’s
circular reveals an important point that in case of books, annual
reports, pamphlets, brochures and the like where content is
supplied the principal supply is considered as supply of printing
service. Whereas in case of supply of printed envelopes, letter
cards, printed boxes, tissues, napkins wall paper etc., the pre-
dominant element is considered to be supply of goods. It
appears that wherever weight age is given for the contents the
same is treated as supply of service. In books, annual reports
value is more for the content rather than the goods. But in case
of envelopes, printed boxes etc., weight age is given for the
material rather than the content.
• Above principles when applied to flex printing, it is obvious that
it is the finishing of material which attracts the readers to read
the content in the flex. Hence, it can be reasonably concluded
that in the case of flex printing, the principal supply is taken as
supply of material viz., trade advertisement material. This view
is supported by the clarification provided in F.No.332/2/2017-
TRU, Dt: December, 2017, with the consolidated FAQs under
Sl.no 59 which reiterates the same as under:

Sl.No Queries Replies

59 What is the classification and These items fall
GST for posters with under HS code
photographs/ images etc. 4911 and attract
printed on digital printers on 12% GST
coated cotton/ mix canvas
media or other synthetic
media?

Q113. Authorized service station of two wheeler and four wheeler

supplies both repair service as well as spare parts at the time of
servicing of vehicles. Materials are taxed at 28% and service is
taxed at 18%. Can a supplier treat the same as composite
supply and consider service as the principal supply and charge
18% for the entire charges received?

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Practical FAQ’s under GST

Ans. ⚫ The Board in its Circular No 47/21/2018-GST dated 8.06.2018

clarified the above issue. An excerpt from the Circular is
reproduced hereunder:
2 How is servicing of cars 2.1 The taxability of supply
involving both supply of would have to be determined on
goods (spare parts) and a case to case basis looking at
services (labour), where the facts and circumstances of
the value of goods and each case.
services are shown
2.2 Where a supply involves
separately, to be treated
supply of both goods and
under GST?
services and the value of such
goods and services supplied are
shown separately, the goods
and services would be liable to
tax at the rates as applicable to
such goods and services
separately.

• The definition of ‘composite supply’ reads: “composite supply

means a supply made by a taxable person………….”. Hence,
wherever two or more taxable supplies are involved in a
contract of supply then applicability of composite supply may be
resorted. However, it may not be possible to club two or more
contract of supplies into one composite supply.
• In the case of servicing of vehicles, one can see the following
features:
o The supply of spare parts and repair services are distinct
o Different purchase orders / work orders are given for
material and service contracts.
o Rates quoted are different.
• Considering the above points and clarifications given in the
Circular, it may be concluded that spare parts and services shall
be taxed at the rates applicable to each of them and not treated
as composite supplies.

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 Composite or Mixed Supply

• However one may take an alternate view in case single work

order is issued by the supplier covering material and labour
components which are inseparable from each other, then the
same may be viewed as composite supply with servicing treated
as principal supply. This normally applies wherever
comprehensive AMC contract which involves supply of both
parts and services.
Q114. A school / Boarding school as part of its education services
collects the following charges from the students :
(a) Term fee
(b) Book fee
(c) Hostel fee
(d) Mess fee
(e) Uniform fee
(f) Stationary fee
(g) Fee for extra-curricular activities like yoga, music etc.,
In addition to the above, it conducts National level seminars
and quiz competitions for which registration fee are collected
from their students and also from other school students.
Whether the above services will be composite supply or a
mixed supply?
Ans. ⚫ As per Sl. No 66 of exemption NN 12/2017-CTR as amended
from time to time, following services by educational institutions
are exempt from GST. (Heading No 9992 / 9993)
“Services provided -
(a) by an educational institution to its students, faculty and
staff;
(aa) by an educational institution by way of conduct of
entrance examination against consideration in the form
of entrance fee
(b) an educational institution, by way of,-
(i) transportation of students, faculty and staff;

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Practical FAQ’s under GST

(ii) catering, including any mid-day meals scheme

sponsored by the Central Government, State
Government or Union territory;
(iii) security or cleaning or house-keeping services
performed in such educational institution;
(iv) services relating to admission to, or conduct of
examination by, such institution;
(v) supply of online educational journals or periodicals;
Provided that nothing contained in sub-items (i), (ii) and (iii) of
item (b) shall apply to an educational institution other than an
institution providing services by way of pre-school education
and education up to higher secondary school or equivalent.
Provided further that nothing contained in sub-item (v) of item
(b) shall apply to an institution providing services by way of,-
(i) pre-school education and education up to higher
secondary school or equivalent; or
(ii) education as a part of an approved vocational education
course.
• Services such as education i.e. term fee, book fee, stationary
fee, uniform fee are invariably collected from all the students at
the time of admission or beginning of the academic year. Hostel
fee and mess fee are collected periodically. Generally option is
given to students for taking up extra-curricular activities.
• In the above charges supply of uniform and stationary are
subject to GST. However, for other charges i.e. education,
hostel, mess, books exemption is available. A question arises
whether entire supplies can be viewed as composite supply and
if it is so what is the principal supply?
• Generally students are mandated to purchase books, uniforms
and stationary along with education services from the school.
Hostel, mess and extra-curricular activities are based on option.
Hence, it can very well be argued that these services viz.,
books, uniforms, stationary, hostel, mess and school education
service constitute composite supply on account of following
reasons:

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 Composite or Mixed Supply

o Perception of the receivers i.e. students is to receive all

these services as a package.
o Majority of service providers (educational institutions)
provide similar bundle of services.
o The different elements in the above bundle are not available
separately. i.e., a non-student is not allowed to buy books,
uniforms, and stationary or avail the service of hostel or
mess or extra-curricular activities.
o All the above services are integral to one overall supply i.e.
education service.
• Hence, it can reasonably be concluded that all the above
elements are naturally bundled in the ordinary course of
business and education service constitutes the principal supply.
Since education service is exempt from GST entire charges are
exempt from tax.
• Seminars and quiz competitions conducted by the schools, if
mandated by the appropriate authority like Directorate of School
Education etc., will then form part of the curriculum. In this
scenario, the fee collected by the school for organising seminars
and quiz competitions will be eligible for exemption.
Q115. A supplier is engaged in manufacture and supply of Trucks
along with refrigerator unit mounted on it; whether this would
amount to supply of truck or supply of refrigerator unit?
Ans. ⚫ As per section 2(30) of the CGST Act, “composite supply”
means a supply made by a taxable person to a recipient
consisting of two or more taxable supplies of goods or services
or both, or any combination thereof, which are naturally bundled
and supplied in conjunction with each other in the ordinary
course of business, one of which is a principal supply.
• A supply would be regarded as composite supply, if the principal
supply is identifiable from two or more supplies given together.
• In the given example one may argue that these supplies are
naturally bundled in the ordinary course of business. However, it
is difficult to identify the principal supply.

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Practical FAQ’s under GST

• Section 2(90) of the CGST Act states that, “principal supply”

means the supply of goods or services which constitutes the
predominant element of a composite supply and to which any
other supply forming part of that composite supply, is ancillary;
• A refrigerator truck or chiller lorry is a van or truck designed to
carry perishable goods at specific temperatures. Buyers choose
truck with refrigerator for dual purpose. Both, transport of goods
as well as to increase the life of perishable goods being
transported. So, it is difficult to identify the predominant element
in the bundle of two supplies. Hence, this would be treated as
mixed supply as per section 2(74) of the CGST Act.
• “Mixed supply” means two or more individual supplies of goods
or services, or any combination thereof, made in conjunction
with each other by a taxable person for a single price where
such supply does not constitute a composite supply.
• The moment a supply is not classified as composite supply the
same would be classified under mixed supply, if single price is
charged for the entire supplies.
• In terms of section 8 of the CGST Act, in case of a mixed supply
comprising two or more supplies shall be treated as a supply of
that particular supply which attracts the highest rate of tax.
• Hence, that supply which attracts highest rate shall be applied
for the entire supply in the instant case.
Q116. M/s. XYZ ltd is awarded a contract of supply and laying of paver
blocks from the Corporation of Chennai in various areas. The
company would like to know whether it would be classified as
works contract or be treated as individual supplies or mixed
supplies.
Ans. ⚫ In the supply and laying of paver block, two elements of supply
are involved:
(i) Supply of paver blocks,
(ii) Laying of the same on the roads / floors.
It is to be decided whether the above two are classified as
individual supplies or together as works contract service.

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 Composite or Mixed Supply

• It is mentioned in the question that the contract is both for

supply of and laying of paver blocks. Hence, it is understood
that title to pavers are transferred only at the time of laying
activity and not at the time of dispatch of the same. Hence, it is
to be seen first whether this amounts to works contract service
within the definition given in the Act.
• Works contract is defined in section 2(119) of CGST Act as
“works contract” means a contract for building, construction,
fabrication, completion, erection, installation, fitting out,
improvement, modification, repair, maintenance, renovation,
alteration or commissioning of any immovable property wherein
transfer of property in goods (whether as goods or in some
other form) is involved in the execution of such contract;”
• Dictionary meaning of various terms used in the definition:
o Building - the action or trade of constructing something
o Construction - the action of building something, typically a
large structure
o Fabrication - To construct by combining or assembling
diverse, typically standardized parts - the action or process
of manufacturing or inventing something.
o Completion - the action or process of completing or finishing
something
o Erection - the action of erecting a structure or object
o Installation - an occasion when equipment, furniture, or a
computer program is put into position or made ready to use
o Fitting out - to put equipment into a room or building so that
it can be used for a particular purpose
o Improvement - an occasion when something gets better or
when you make it better
o Modification - a change to something, usually to improve it
o Repair – Restoring something damaged, faulty, or worn to a
good condition
o Maintenance - the work needed to keep a road, building,
machine, etc. in good condition

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o Renovation - the act or process of repairing and improving

something, especially a building
o Alteration - a change, usually a slight change, in the
appearance, character, or structure of something
o Commissioning - bring (something newly produced) into
working condition.
The above operations are with reference to any immovable
property wherein transfer of property in goods (whether as
goods or in some other form) is involved in the execution of
such contract
• Supply and laying of paver blocks will be works contract, if
following conditions are satisfied –
➢ Activity of laying must fall within any of the activities
mentioned in the definition
➢ Once the activity is done, it must result in immovable
property
➢ Property in goods must be transferred while execution of
the contract
Let’s analyze each of the above conditions as follows:
➢ Activity of laying must fall in any of the activities mentioned
in definition:
Laying of paver on the concrete floors or roads can be regarded
as construction activity. The dictionary meaning of construction
is “the action of building something, typically a large structure“.
Several judicial precedents are available which are discussed
below:
o M/s. Abideep Interlock Pavers Pvt. Ltd. v. the
Commissioner of Central Excise [2018 (9) TMI 91 -
ST/262/2008-DB & ST/640/2009-DB] – It was observed that
the activity of laying of internal roads and approach roads to
the compound of the building was undertaken by the
appellant as a separate and exclusive activity and not as
part of the contract for construction of a factory / building.
Therefore, they are specifically covered under the exclusive

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 Composite or Mixed Supply

clause of definition of ‘commercial or industrial construction

service.
o M/s. Conwood Pre Fab Ltd. v. Commissioner of Central
Excise, Raigad [2015 (1) TMI 1191 - 2014 (36) S.T.R. 1064
(Tri. - Mumbai)]. It was held that the activity undertaken by
the appellant, i.e. laying of paver blocks, more appropriately
comes under the scope of ‘commercial or industrial
construction service’.
From the above decisions, it is evident that the activity of laying
paver block can very well be considered as construction activity.
➢ Once the activity is done, it must result in immovable
property
We need to find whether laid paver blocks can be considered as
immovable property. Several judicial pronouncements are
available under the erstwhile indirect tax regime.
o The tests laid down by the Supreme Court as found in the
celebrated case of Municipal Corporation of Greater
Bombay v. Indian Oil Co. Ltd 1991 [Suppl (2) SCC 18] `
be summarized as under:
“The test was one of permanency; if the chattel was
movable to another place of use in the same position or
liable to be dismantled and re-erected at the later place;
if the answer to the former is positive it must be movable
property but if the answer to the latter part is in the
positive, then it would be treated as permanently
attached to the earth.”
o In case of Tower Vision India Pvt. Ltd. v. Commissioner
of C. Ex. (ADJ.), Delhi [2016 (42) S.T.R. 249 (Tri. - LB)], it
was held that Towers were immovable structures and ipso
facto non-marketable and non-excisable -Fact that towers
could be dismantled, moved and re-erected at another
location by itself could not make them movable goods. - On
their dismantling into angles and channels, nuts and bolts,
only “angles and channels” could be transported. Towers
when embedded are considered as immovable property.

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Practical FAQ’s under GST

In view of the above rulings, it can be concluded that any

object which is permanently fastened to earth is described
as immovable property. Also, the fact that an object can be
dismantled and re-erected ipso facto does not make it a
movable property. In case of paver blocks, they are erected
on a concrete base and permanently fastened to it. It is
nothing but replacement of concrete roads. One unique
feature of paver block is that fifty to sixty percentage of the
erected blocks can be removed and reused. However no
customer would lay the paver block with the intention of
removing it. As per the above judgments just because an
object is reusable that will not ipso facto make them
movable. Also the intention of the receiver is to use the laid
paver block as roads. Hence, this can be treated as
immovable property.
➢ Property in goods must be transferred while executing the
contract
This condition is satisfied since title to pavers is transferred at
the time of laying the paver blocks.
In view of above discussion, it can be concluded that supply
and laying of paver blocks can be considered as works contract
and rate applicable for supply of works contract services would
apply to it.
Q117. In case of composite supply, if the principal supply is exempt,
whether all supplies in the bundle will be exempt?
Ans. The definition of composite supply reads thus: “composite supply
means a supply made by a taxable person to a recipient consisting
of two or more taxable supplies of goods or services or both…….”
• From the above definition one may have a doubt that since no
tax is payable in exempted supplies it would be a non-taxable
supply. Hence, if exempt supply is included in a bunch of
supplies naturally bundled, and then the same may not be a
composite supply. This may not be the intention of the statute.
• Whether a product is leviable to tax or not has been clarified in
several decisions under the erstwhile regime. In Wallace Flour
Mills company ltd v. Collector of Central Excise [1989 (9)

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 Composite or Mixed Supply

TMI 106 - 1989 (44) E.L.T. 598 (SC), (1989) 4 SCC 592], the
Hon’ble Supreme Court has observed that “Excisable goods, do
not become non-excisable goods merely by the reason of the
exemption given under a notification”. This view was also taken
by the Madras High Court in Tamil Nadu (Madras State)
Handloom Weavers Co-operative Society Ltd. v. Assistant
Collector of Central Excise [1978 (2) E.L.T. (J 57)].
• Doubts as to whether exempted goods are liable to duty or not
have effectively been put to rest by the Supreme Court in the
above case. It clarified that fully exempted goods were also
excisable goods and hence were chargeable to duty if the
exemption was removed prior to removal but subsequent to
manufacture. Also, the Supreme Court in the case of UOI v.
Nandi Printers P Ltd [2001 (127) ELT 645], has held that even
full exemption from duty under a notification does not make
goods as non-excisable.
• From the above judicial pronouncements one can conclude that
exempted goods are not non-leviable goods. The same would
apply in GST law too.
• Taxable supply is defined in section 2(108) of the Act thus:
“taxable supply means a supply of goods or services or both
which is leviable to tax under this Act;”
• In view of the above discussed judicial precedents, one can
reasonably conclude that exempted supplies are also taxable
supplies. The moment it is concluded that exempted supplies
are taxable supplies, the same can very well be a part of
composite supply and if the principal supply happens to be
exempted supply, then the entire bundle cannot be subjected to
tax.
• One can refer section 8 of the CGST Act, which reads thus:
“The tax liability on a composite or a mixed supply shall be
determined in the following manner, namely:—
(a) a composite supply comprising two or more supplies, one of
which is a principal supply, shall be treated as a supply of
such principal supply; and

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Practical FAQ’s under GST

(b) a mixed supply comprising two or more supplies shall be

treated as a supply of that particular supply which attracts
the highest rate of tax”
• There appears to be a dichotomy between section 2(31) and
section 8. The definition of composite supply uses the word “two
or more taxable supplies”, whereas section 8 uses the phrase
“comprising two or more supplies”. Hence, the intent of the law
appears not to exclude exempt supplies from the ambit of
composite supply. Also, Board Circular CIR 32, point no 5 inter
alia, with reference to health care services, has clarified that
food supplied to in-patients as advised by doctors / nutritionists
is a part of composite supply of health care and not separately
taxable. Hence, the intent of law is made clear by this Circular
implying that taxable supplies include exempted supplies also.
Q118. Where a supplier supplies bottle of shampoo, conditioners and
soap in a single container for a single price, whether the same
would amount to composite supply or mixed supply? Is it
possible to consider it as composite supply since all these
products are used for bathing purpose?
Ans. ⚫ To be a composite supply, two or more supplies must be
naturally bundled in the ordinary course of business. Meaning of
“naturally bundled” and “ordinary course of business” has been
categorically explained in GST flyer.
• Supply of shampoo with soap is not said to be naturally bundled
in the ordinary course of business due to the following reasons:
I. Generally these kinds of bundle is offered to customers as a
measure of sales promotion only and not as a natural
bundle.
II. Even if offered for single price, customers are free to buy
them separately.
III. These kinds of offers do not come from majority of the
suppliers and not given throughout the year – may be
during festival season to boost the sales.
IV. It is difficult to identify the principal supply in this bundle;
hence it goes out of the ambit of the definition of “composite
supply”.

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 Composite or Mixed Supply

• From the above parameters, it can be concluded that this is

artificially bundled and hence would be classified as mixed
supplies and it shall be treated a supply which attracts the
highest tax rate.
• Also, Board vide its CIR 92 in para B (i) has clarified the above
point. Excerpts of the same is reproduced hereunder:
(i) Sometimes, companies announce offers like ‘Buy one, get
one free” For example, “buy one soap and get one soap
free” or “Get one tooth brush free along with the purchase
of tooth paste”. As per sub-clause (a) of sub-section (1) of
section 7 of the said Act, the goods or services which are
supplied free of cost (without any consideration) shall not
be treated as “supply” under GST (except in case of
activities mentioned in Schedule I of the said Act). It may
appear at first glance that in case of offers like “Buy one,
get one free”, one item is being supplied free of cost without
any consideration. In fact, it is not an individual supply of
free goods but a case of two or more individual supplies
where a single price is being charged for the entire supply.
It can at best be treated as supplying two goods for the
price of one.
(ii) Taxability of such supply will be dependent upon as to
whether the supply is a composite supply or a mixed supply
and the rate of tax shall be determined as per the provisions
of section 8 of the said Act.”
Q119. Tyres are taxed at 28% under HSN 4011 whereas tyre tubes are
taxed at 18% under HSN 4013. Where a supplier sells tyre along
with tyre-tubes whether is it a composite supply or a mixed
supply?
Ans. A tyre manufacturer or a supplier supplies tyres as well as tyre tubes
to original manufacturers for the purpose of fitting into the motor
vehicles. Hence, both are not separately supplied. The primary
purpose of supplying both these items together is to form part of
motor vehicles at the time of manufacture. Role of tyre and tyre tube
are vital in the functioning of motor vehicles. However, a tyre cannot

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function without a tube and a tyre tube cannot function without a

tyre. Both are dependent on each other.
To fit into the definition of composite supply it is imperative to
identify the principal supply. According to section 2(90) “principal
supply means the supply of goods or services which constitutes the
predominant element of a composite supply and to which any other
supply forming part of that composite supply is ancillary”
When one analyses whether tyre is principal supply or tyre tube is
principal supply, obviously the pre-dominant element, main intent of
the car manufacturer would be to buy the tyre rather than tyre tube.
One may argue that since both are dependent to each other none
constitutes principal supply. However, as per the definition the main
parameter is “Pre-dominant element or main intent” of the receiver is
to buy the tyre. One of the ancillary parts is tube and the same
cannot be stated to be a principal supply.
Hence, the rate of tax shall be 28% for the entire bundle being the
rate applicable for tyre.
Q120. Whether jewellery made on an order received from customer
who also provides old gold ornaments, is a mixed supply or
composite supply?
Ans. It is neither a composite supply nor a mixed supply, because in both
the cases, two or more supplies must be involved. As far as supplier
is concerned, only one supply is involved i.e. supply of jewellery. In
case of exchange of old gold by the customer, it is not a supply by
the supplier. However, taxable value must be calculated according
to the provisions of Rule 27 of the CGST Rules, since section 15 is
not applicable in this case. Tax must be discharged at open market
value (OMV) of jewelleries being supplied.
Q121. Hospitals collect various charges from in-patients and out-
patients. This would generally include charges for treatment,
nursing care, medical consultancy, supply of medicines,
infrastructure like room rent, food etc. Whether entire bundle
would be regarded as composite supply and no tax is payable
health care being the principal supply?

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 Composite or Mixed Supply

Ans. ⚫ Point No. 5 of CIR 32 in the case of health care services has
clarified that food supplied to in-patients as advised by doctors /
nutritionists is a part of composite supply of health care and not
separately taxable. Excerpt of the same is reproduced
hereunder:
5. Is GST leviable in following Health care services
cases: provided by a clinical
establishment, an authorised
(1) Hospitals hire senior
medical practitioner or
doctors/ consultants/
paramedics are exempt. [Sl.
technicians independently,
No. 74 of notification No.
without any contract of such
12/2017-C.T. (Rate) dated
persons with the patient; and
28.06.2017 as amended
pay them consultancy
refers].
charges, without there being
any employer employee (1) Services provided by
relationship. Will such senior doctors/ consultants/
consultancy charges be technicians hired by the
exempt from GST? Will hospitals, whether
revenue take a stand that employees or not, are
they are providing services to healthcare services which
hospitals and not to patients are exempt.
and hence must pay GST?
(2) Healthcare services have
(2) Retention money: been defined to mean any
Hospitals charge the service by way of diagnosis
patients, say, ₹ 10000/- and or treatment or care for
pay to the consultants/ illness, injury, deformity,
technicians only ₹ 7500/- and abnormality or pregnancy in
keep the balance for any recognised system of
providing ancillary services medicines in India [para
which include nursing care, 2(zg) of Notification No.
infrastructure facilities, 12/2017-CT(Rate)].
paramedic care, emergency Therefore, hospitals also
services, checking of provide healthcare services.
temperature, weight, blood The entire amount charged
pressure etc. Will GST be by them from the patients
applicable on such money including the retention money
retained by the hospitals? and the fee/payments made

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Practical FAQ’s under GST

(3) Food supplied to the to the doctors etc., is towards

patients: Health care the healthcare services
services provided by the provided by the hospitals to
clinical establishments will the patients and is exempt.
include food supplied to the
(3) Food supplied to the in-
patients; but such food may
patients as advised by the
be prepared by the canteens
doctor/nutritionists is a part
run by the hospitals or may
of composite supply of
be outsourced by the
healthcare and not
Hospitals from outdoor
separately taxable. Other
caterers. When outsourced,
supplies of food by a hospital
there should be no ambiguity
to patients (not admitted) or
that the suppliers shall
their attendants or visitors
charge tax as applicable and
are taxable.
hospital will get no ITC. If
hospitals have their own
canteens and prepare their
own food; then no ITC will be
available on inputs including
capital goods and in turn if
they supply food to the
doctors and their staff; such
supplies, even when not
charged, may be subjected to
GST.

• The above Circular has settled the issue relating to supply of

food to in-patients and out-patients. Whereas the hospital
collects other charges like room rent, medicines supplied to
patients. In-patient services generally will include services
provided by hospitals to in-patients under the direction of
medical professionals aimed at curing, restoring, maintaining
the health of a patient and the services comprise of medical,
pharmaceutical and paramedical services, rehabilitation
services, nursing services, laboratory and technical services.
• The principles set out in the Circular in relation to food, would
apply for other ancillary supplies such as providing medicines to
in-patients, room rent, stent and implants provided to patients as

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 Composite or Mixed Supply

a part of health care services and all these are integral part of
the health care services. The in-patient is under continuous
monitoring of the doctors and nursing staff and administration
and dosage of medication is all under the control of the doctor
and the nursing staff. The entire treatment protocol is
documented and recorded. Thus, it is clear that in case of an
inpatient, the hospital provides a bundle of supplies which is
classifiable under health care services eligible for exemption
under Sl.No. 74 of NN12/2017-CTR. Entire gamut of these
services to in-patients shall be classified under health care
services being principal supply and no GST would be applicable
to drugs supplied, stents and implants provided and room rent/
charges.
• Similarly the medicines supplied by hospitals or pharmacies run
by hospitals to out-patients shall be treated as individual supply
and cannot be equated with treatment given for in-patients and
hence the same becomes taxable. The extent of treatments
given to in-patients and out-patients are entirely different. The
in-patient is under continuous monitoring of the doctors and
nursing staff and administration and dosage of medication is all
under the control of the doctor and the nursing staff right from
the admission stage to discharge stage. Same is not the case in
case of out-patient. Hence, medicines and food supplied to
out-patients is taxable.
Q122. What is the principal supply- ice cream or restaurant service in
case supply of ice creams is made (a) where no seating
arrangement is there and (b) where air conditioned seating
arrangement is there?
Ans. Restaurant service is defined in Explanation (xxxii) of NN 11/2017-
CTR as amended by Notification No. 20/2019- Central Tax (Rate)
dated 30.09.2019 which is as follows:
“Restaurant service’ means supply, by way of or as part of any
service, of goods, being food or any other article for human
consumption or any drink, provided by a restaurant, eating joint
including mess, canteen, whether for consumption on or away
from the premises where such food or any other article for
human consumption or drink is supplied”

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Practical FAQ’s under GST

From the above definition it is clear that wherever eating joints exist, it
shall be regarded as restaurant service. Hence wherever seating
arrangement is there whether air-conditioned or otherwise it shall be
regarded as restaurant service and the rate applicable for restaurant
shall be applied for supply of ice creams.
Wherever seating arrangements do not exist, it shall be classified as
supply of ice creams and not as restaurant service.
Q123. A supplier is engaged in water proofing service with material.
Whether this is composite supply or mixed supply?
Ans. Waterproofing is the process of making an object or structure
waterproof or water-resistant so that it remains relatively unaffected
by water or resisting the ingress of water under specified conditions.
Such items may be used in wet environments or underwater to
specified depths. Many types of water proofing exist in the industry
like box type water proofing, brick bat proofing, bituminous proofing
etc., Where this is done on a building or a structure, materials such
as cement, river sand, bricks, water proof chemicals are used. Water
proofing work is classified under Heading 995453 – “Roofing and
waterproofing services” falling under the heading “Special trade
construction services” and chargeable to 18% tax.
‘Works contract’ is defined in section 2(119) of CGST Act, to mean
“a contract for building, construction, fabrication, completion,
erection, installation, fitting out, improvement, modification, repair,
maintenance, renovation, alteration or commissioning of any
immovable property wherein transfer of property in goods (whether
as goods or in some other form) is involved in the execution of such
contract;
Where the material and labour is combined in a contract of water
proofing work, it falls under the meaning of ‘works contract’ since
following tests are satisfied:
─ it is a contract of improvement – repair – maintenance
─ of immovable property
─ transfer of property in goods (materials used) is involved in the
execution of such contract.

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 Composite or Mixed Supply

Q124. A hotel providing accommodation service runs a restaurant and

a separate bar.
1. Food is serviced to outsiders as well as in-room service is
made. Whether such in-room service can be considered as
composite supply?
2. Whether complementary break-fast provided to the guests,
constitute a composite supply?
3. Whether collection of car parking charges along with room
bill constitutes a composite supply?
Ans. Case 1
The definition of “Restaurant service” reads: “Restaurant service’
means supply, by way of or as part of any service, of goods, being
food or any other article for human consumption or any drink,
provided by a restaurant, eating joint including mess, canteen,
whether for consumption on or away from the premises where such
food or any other article for human consumption or drink is supplied”
Hence, it is clear that where food is consumed in the restaurant or
away from the place, it is covered within the definition. Also, one
may raise a question when food is supplied to guests staying in the
hotel, will that be taken as composite supply and the principal supply
is accommodation service. It cannot be so, since both supplies are
not naturally bundled in the ordinary course of business due to the
following reasons:
o Guests are free to go out and consume food wherever they want
o Food is not provided to all guests and is offered only to those
guests who prefer the same.
Hence, accommodation service and restaurant service are to be
treated as individual supplies and rate of GST shall be applied
accordingly.
Case 2
When complementary break-fast is provided to guests, it shall be
treated as composite supply and principal supply is accommodation
service. This is so because both are naturally bundled in the

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Practical FAQ’s under GST

ordinary course of business. Following points can be attributed to

the above conclusion
o Complementary break-fast is provided to all the guests.
o Guests visit the hotel primarily to avail accommodation service
and not to take complementary break-fast.
Due to the above points, accommodation service shall be taken as
principal supply.
Case 3
Service of car parking is naturally bundled with accommodation
service. Guests avail parking facility because accommodation service
is the pre-dominant intention. Hence, accommodation service is the
principal supply. This would be so even if parking charges are
separately billed from the guests.

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 Chapter 3
Reverse Charge Mechanism
Q125. Whether services of Members of the Managing Committee (MC)
to the Co-op Society being a registered person, would fall
within the scope of Section 9(3) of the CGST Act. Who has to
calculate GST liability as MC members were not paid any sitting
fees, meeting allowance etc. by whatever name called.
Ans. As per Section 9(3) of the CGST Act and Section 5(3) of the IGST
Act, the Government may, on the recommendations of the Council,
by notification, specify the categories of supply of goods or services
or both, the tax on which shall be paid on reverse charge basis by
the recipient of such goods or services or both and all the provisions
of this Act shall apply to such recipient as if he is the person liable
for paying the tax in relation to the supply of such goods or services
or both.
The CBIC vide NN 13/2017-CTR and NN 10/2017-ITR has specified
the categories of supply of services, wherein the GST will be
charged on RCM. The services of Member(s) of Managing
Committee (MC) to Co-op society are not covered by any of the
above Notification(s) and therefore such services are not liable for
payment of tax on reverse charge basis.
Q126. Whether downloading of any film, song etc. via Internet by a
non-taxable person (Household person) in India from any
person located in any non-taxable territory will attract GST
under RCM?
Ans: As per Section 2(17) of the IGST Act, “online information and
database access or retrieval services (OIDAR)” means services
whose delivery is mediated by information technology over the
internet or an electronic network and the nature of which renders
their supply essentially automated and involving minimal human
intervention and impossible to ensure in the absence of information
technology and includes electronic services such as, -
(i) advertising on the internet;

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Practical FAQ’s under GST

(ii) providing cloud services;

(iii) provision of e-books, movie, music, software and other
intangibles through telecommunication networks or internet;
(iv) providing data or information, retrievable or otherwise, to any
person in electronic form through a computer network;
(v) online supplies of digital content (movies, television shows,
music and the like);
(vi) digital data storage; and
(vii) online gaming;”
In the instant case, download of films, songs etc. via the medium of
Internet from a database by a non-taxable online recipient
(household) falls under the aforesaid definition of OIDAR Service.
As per Section 14(1) of the IGST Act, read with NN 10/2017-ITR, in
case of supply of OIDAR services, by any person located in a
non-taxable territory and received by a non-taxable online recipient,
the person located in the non-taxable territory (OIDAR service
provider) shall be the person liable to pay GST
Q127. Whether a tax payer availing security services is bound to pay
tax on RCM basis even if the security service provider is a
registered person?
Ans. Security services (services provided by way of supply of security
personnel) provided by a person other than a body corporate to a
registered person are covered under NN 13/2017-CTR /
NN 10/2017-ITR.
Therefore, such security services will be liable under RCM so long
as the service provider is a person other than a body corporate,
irrespective of the fact whether or not he has otherwise registered
under GST Act, but the receiver of these services is a registered
person, located in the “taxable territory”
Q128. Whether a registered trader who procures GST exempted cattle
feed is liable for RCM on inward transport charges paid for the
procurement of GST exempted cattle feed?

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 Reverse Charge Mechanism

Ans. The GST taxability of transport charges depends on the mode of

transport and the bundling of supply. If the said transport is by way
of Road (other than GTA) or offered as a bundled supply qualifying
as a composite supply then there may not be any liability to tax this
transport charges and hence RCM may not apply since the principal
supply is tax exempted goods viz., cattle feed
Further, even in the case of transport by road by a GTA / rail /
vessel, the said service may be exempt if the goods involved in
transport falls under the definition of "Agricultural Produce" vide
exemption NN 12/2017-CTR.
Q129. Whether commission paid to a person or entity located in a
foreign country falls under the ambit of section 9(3) of the
CGST Act?
Ans. If the service rendered is an "intermediary service" falling under
section 2(13) of the IGST Act, for which the commission is paid to an
agent or a service provider located in the non-taxable territory, then
such a service may not be considered as import of service under
section 2(11) of the CGST Act and consequently may not attract
RCM under section 5(3) of the IGST Act read with NN 10/2017-ITR,
as the place of supply under section 13(8)(b) of the IGST Act, is
outside India.
Q130. What is the difference in GST levy between sponsorship and
contribution to charitable institutions?
Ans. A “trust” is treated as a person under section 2(84) of the CGST Act.
The amount of consideration involved for sponsorship services
provided by a charitable organisation may be liable to GST, if the
said activity can be termed as “business” within the meaning of the
CGST Act and unless the sponsorship activities are specifically
exempted by any notification. Further, sponsorship services
provided to a body corporate / firm may be liable to RCM in the
hands of such recipient body corporate / firm.
However, voluntary contribution received by a charitable institution
may not be liable for GST, if it is in the nature of an unconditional
donation. Circular No. 116/35/2019-GST dated 11.10.2019 also
mentions that, if all the three conditions are satisfied namely, the gift
or donation is made to a charitable organization, the payment has

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Practical FAQ’s under GST

the character of gift or donation and the purpose is philanthropic (i.e.

it leads to no commercial gain) and not advertisement, GST is not
leviable.
Q131. A Charitable trust constructs a temple for worship of people
and paid the freight charges on inward purchase of goods and
materials for construction of the temple. Whether RCM is
applicable on freight charges paid?
Ans. Supplies of services by a GTA in respect of transportation of goods
by road to only notified recipients or to a registered person are liable
to RCM. As temples are generally not covered under the above
notified category, RCM liability may not arise to temple in this
regard.
If the freight charges are paid to any person transporting goods by
road who is not a GTA or not issued any consignment note etc. in
respect of goods transport by road, then no GST is payable and
hence no RCM, vide Serial No 18, Chapter Heading 9965, of
NN 12/2017-CTR.
Q132. Whether rent a cab services are covered under RCM?
Ans. The services provided by way of renting of a motor vehicle provided
to a body corporate by a person other than a body corporate, where
the cost of fuel is also included in the consideration charged (and
GST is charged at 5%), is required to comply with the RCM
requirements of section 9(3) of the CGST Act vide Notification
22/2019-Central Tax (Rate) dated 30.09.2019 [“NN 22/2019-CTR”]
with effect from 1-10-2019.
But, by Notification No 29/2019-Central Tax (Rate) dated 31.12.2019
[“NN 29/2019-CTR”], the above has been amended to provide that
any person, other than a body corporate who supplies the service to
a body corporate, and does not issue an invoice charging central tax
at the rate of 6 %, to the service recipient such body corporate
located in the taxable territory would get covered by RCM
provisions.
However, one need to know about the difference between renting of
motor vehicle and transport of passenger’s service and rent a cab
services before determining the applicability of RCM.

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Q133. Does reverse charge provisions apply to supplies received by

SEZ unit?
Ans. The provisions relating to reverse charge for SEZ units are
contained in the IGST Act. As provided under Notification No
18/2017-Integrated Tax (Rate) dated 05.07.2017, the services
imported by an SEZ unit or SEZ Developer for authorized operations
are exempted from GST. Therefore, for inward supplies other than
import of services for authorized operations, RCM shall apply on the
SEZ unit as well.
Q134. We are registered as AOP and not registered under GST law. We
are conducting seminar for PSUs women employees every year
and we are collecting funds from PSUs. Our transaction values
are below 20 lakhs. The question is whether PSUs have to pay
GST under RCM
Ans. With effect from 1.2.2019, RCM under section 9(4) of the CGST Act
is applicable only in respect of specified class of registered persons
in respect of supply of specified categories of goods or services or
both received from an unregistered supplier and not in respect of
other cases. Service by way of “Conducting Seminars” is not a
notified / specified supply of Service under section 9(4) (or u/s 9(3))
and hence may not attract RCM in the hands of the PSU.
Q135. Whether tax under RCM is payable in respect of any
Membership fees paid to an overseas professional body/
organisation?
Ans. If the payment towards Membership fees to an overseas body or
organisation is considered as a "supply" and "taxable supply", then
such payment may be liable to RCM as import of services, if paid by
a recipient situated inside the taxable territory.
Q136. Whether the fees paid outside India for certification services by
Indian Company is leviable under GST on reverse charge basis?
Ans. If such certification involves, services supplied -
a) in respect of goods which are required to be made physically
available by the recipient of services to the supplier of services,
or to a person acting on behalf of the supplier of services in
order to provide the services, or

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Practical FAQ’s under GST

b) to an individual, represented either as the recipient of service or

a person acting on behalf of the recipient, which require the
physical presence of the receiver or the person acting on his
behalf, with the supplier
then both these instances may generally be considered as import of
services liable to pay RCM if such services are performed in India
under section 13(3) of the IGST Act.
However, when the services are provided from a remote location by
way of electronic means, the place of supply shall be the location
where the goods are situated at the time of supply of services and
on that basis, GST taxability is to be decided and if the recipient and
the goods are located inside the taxable territory then GST liability
arises and it has to be paid under RCM.
Also, in respect of goods which are temporarily imported into India
for repairs or for any other treatment or process and are exported
after such repairs or treatment or process without being put to any
use in India, other than that which is required for such repairs or
treatment or process, then there is no GST liability or RCM payment.
Where any of the above services are supplied at more than one
location, including a location in the taxable territory, its place of
supply shall be the location in the taxable territory.
Where the repair , treatment or process are carried on in more than
one State or Union territory, the place of supply of such services
shall be taken as being in each of the respective States or Union
territories and the value of such supplies specific to each State or
Union territory shall be in proportion to the value for services
separately collected or determined in terms of the contract or
agreement entered into in this regard or, in the absence of such
contract or agreement, on any other prescribed basis. No specific
basis has been prescribed so far, in this regard.
Q137. In case of stone crushing units, freight is paid to individual
truck owners for bringing stone from mines to stone crusher
unit. Is there any liability to pay tax on reverse charge on freight
as this is not payment of freight to GTA?

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Ans. Under NN 12/2017-CTR, transport of goods by road other than by a

GTA is exempt.
The term GTA has been defined in Clause 2(ze) of NN 12/2017-CTR
as follows:
“Goods transport agency means any person who provides
service in relation to transport of goods by road and issues
consignment note, by whatever name called;”
An individual truck owner who does not issue a consignment note is
not a GTA. Therefore, the services rendered by him are exempt and
hence there is no necessity to pay tax under RCM.
Further in erstwhile Service Tax Law in the following cases, it has
been held that when services of transport of goods rendered by
individual truck operators (and not a GTA issuing a consignment
note) are not liable to service tax –
(a) CCE v. Kanaka Durga Agro Oil Products Pvt. LTD2009 (15)
S.T.R. 399 (Tri. -Bang.)
(b) CCE v. Shanti Fortune (I) Pvt. Ltd. 2010 (19) S.T.R. 883 (Tri. -
Chennai)
(c) Laxminarayana Mining Co. v. CST 2010 24 STT 6
The above decisions may hold good under the GST Law as well,
since the scheme of rate / exemption entries for transport of goods
by road are similar to that in erstwhile service tax.
Q138. What are the additional documents to be maintained by the
recipient in case of reverse charge transactions?
Ans. In case of reverse charge transactions, the following additional
documents are required to be maintained:
a. Self-invoice as required under section 31(3) (f) of the CGST Act,
only if the supplier is unregistered.
b. Payment voucher as required under section 31(3)(g) of the
CGST Act.
Q139. Section 16(4) of the CGST Act, specifies that a registered
person shall not be entitled to take ITC in respect of any invoice
or debit note for supply of goods or services or both after the

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due date of furnishing of return under section 39 of the CGST

Act for the month of September of the subsequent financial
year. Is Section 16 (4) of the CGST Act applicable to credit taken
for taxes paid under RCM provision?
Ans. Under Section 31(3) (f) of the CGST Act, a registered person who is
liable to pay tax as per section 9(3)/ 9(4) of the CGST Act, shall
issue an invoice in respect of goods or services or both received by
him from the supplier who is not registered on the date of receipt of
goods or services
Further, as per rule 36 of the CGST Rules, which specifies the
documentary requirements for claiming ITC, provides that "an
invoice" issued in accordance rule 31(3) (f) of the CGST Rules shall
be one such document based on which ITC can be claimed. Hence,
a view may be taken that section 16(4) of the CGST Act, may be
applicable for RCM paid under section 9 (3)/ (4) of the CGST Act.
Q140. Can one invoice be issued for all RCM inward supplies during a
period?
Ans. The second proviso to rule 46 of the CGST Rules, provides that a
registered person may issue a consolidated invoice at the end of a
month for supplies covered under section 9(4) of the CGST Act ,
where the aggregate value of such supplies exceeds ` 5,000/- in a
day from any or all the suppliers. Hence consolidated invoice for a
month can be issued only in respect of supplies covered under
section 9 (4) of the CGST Act.
In respect of supplies covered under section 9 (3) of the CGST Act
and received from unregistered person, separate invoice is to be
raised by the recipient for each supply.
Q141. How to claim to credit on RCM payments which is not visible in
FORM GST-2A?
Ans. Taxes paid under RCM, shall not be appearing in FORM GSTR-2A.
The recipient is to claim ITC on the basis of self-generated invoice
as per section 31(3) (f) of the CGST Act, subject to payment of tax.
Under rule 36(4) of the CGST Rules, w.e.f. 9.10.2019 (and as
amended w.e.f. 1.1.2020) ITC to be availed by a registered person
in respect of invoices or debit notes, the details of which have not

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been uploaded by the suppliers under section 37(1) of the CGST

Act, shall not exceed 10% of the eligible ITC available in respect of
invoices or debit notes the details of which have been uploaded by
the suppliers under section 37 (1) of the CGST Act.
Circular No. 123/42/2019-GST, dated 11-11-2019 clarifies as
follows: "The restriction of availment of ITC is imposed only in
respect of those invoices/debit notes, details of which are required
to be uploaded by the suppliers under sub-section (1) of section 37
and which have not been uploaded. Therefore, taxpayers may avail
full ITC in respect of IGST paid on import, documents issued under
RCM, credit received from ISD etc. which are outside the ambit of
sub-section (1) of section 37, provided that eligibility conditions for
availment of ITC are met in respect of the same….. "
Hence, one may conclude that the impugned restriction under
rule 36(4) of the CGST Rules, will not be applicable to ITC availed
for RCM inward supplies.
Q142. Where goods are received on 30th day of the month and freight
charges relating to such goods are paid on 3rd day of the
following month then RCM will be paid in which month?
Ans. As per section 13 of the CGST Act, in case of supplies where tax is
to be paid on RCM basis, the time of supply shall be the earlier of —
a) the date of payment or
b) the date immediately following 60 days from the date of issue of
invoice by the supplier.
Hence in the given situation the time of supply will depend on the
date of invoice. However, assuming the date of payment to be
earlier, the supply will have to be reported in the returns filed for the
relevant month in which the payment is made.
Q143. Director ‘A’ of a company is being paid technical fee subject to
TDS under section 194J of the Income Tax, 1961 and Director
‘B’ is being paid commission subject to TDS under section
194H of the Income Tax Act. Also, both the directors are
being paid salary on a monthly basis subject to TDS under
section 192 of the Income Tax Act, 1961. Are reverse charge
provisions applicable to Mr. A & Mr. B?

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Ans. In the instant case, remuneration paid to directors can be examined

under the following two categories:
(a) Leviablity of GST on remuneration paid by companies to the
directors as employees which is subject to section 192, by the
company.
(b) Leviablity of GST on remuneration paid by companies to the
directors as professional/ commission subject to TDS under
section 194J/ 194H by the company.
The CBIC vide Circular 140/10/2020-GST dated 10.06.2020,
specified that, the activities performed by the director can either be
in the course of employer-employee relation (i.e. a “contract of
service”) or there could be an element of “contract for service”.
Further, the issue has been deliberated by various courts in the pre-
GST regime and it has been held that a director who has also taken
an employment in the company may be functioning in dual
capacities, namely, one as a director of the company and the other
on the basis of the contractual relationship of master and servant
with the company, i.e., under a contract of service (employment)
entered into with the company. The CBIC clarified that the part of
director’s remuneration which are declared as ‘Salaries’ in the books
of a company and subjected to TDS under section 192 of the Income
Tax Act, are not taxable being consideration for services by an
employee to the employer in the course of or in relation to his
employment in terms of Sl. No. 01 of Schedule III of the CGST Act.
The CBIC further clarified that director’s remuneration which are
being subjected to TDS under section 194J/194H of the Income Tax
Act as fees for professional or technical services shall be treated as
consideration for providing services which are outside the scope of
Schedule III of the CGST Act, and is therefore, taxable. Further, in
terms of NN 13/2017-CTR, the recipient of the said services i.e. the
company is liable to discharge the applicable GST on it on reverse
charge basis.
Hence, technical fee paid to Mr. A and commission paid to Mr. B
shall be subjected to reverse charge and the company shall pay the
same as a recipient of the service.

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Q144. Whether rent paid by a Corporate to an individual who is also its

Director is liable to GST under forward charge or reverse charge?
Ans. Services provided by a Director in the capacity as a Director alone,
are liable to tax under a reverse charge. In the given case, the rent
is paid to the individual who owns the immovable property.
Incidentally the individual is also the Director. However, the rental
services are provided by the person concerned, in his individual
capacity and not in the capacity as a Director. Accordingly, GST is
leviable by the individual subject to the fulfilment of aggregate
turnover criteria.
Q145. If a service is mentioned in the exemption list and the same is
imported from outside India then whether tax under RCM needs
to be paid or not?
Ans. As per section 5(3) of the IGST Act, “The Government may, on the
recommendations of the Council, by notification, specify categories
of supply of goods or services or both, the tax on which shall be paid
on reverse charge basis by the recipient of such goods or services
or both and all the provisions of this Act shall apply to such recipient
as if he is the person liable for paying the tax in relation to the
supply of such goods or services or both.”
Further under section 6(1) of the IGST Act, where the Government is
satisfied that it is necessary in the public interest so to do, it may, on
the recommendations of the Council, by notification, exempt
generally, either absolutely or subject to such conditions as may be
specified therein, goods or services or both of any specified
description from the whole or any part of the tax leviable thereon
with effect from such date as may be specified in such notification.
The CBIC vide NN 10/2017-ITR, has specified the goods under
IGST covered under RCM.
If the said import of services is exempted by virtue of section 6 of
the IGST Act, and the service which is imported is covered under an
exemption Notification, than no GST has to be paid under RCM as
well.
Q146. A Football Academy registered in India avails the service of a
Foreign Coach. The Foreign coach comes to India and trains

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students of the football academy. Whether tax under RCM

needs to be paid?
Ans. Section 2 (77) of the CGST Act, defines a non-resident taxable
person as under -
“(77) non-resident taxable person” means any person who
occasionally undertakes transactions involving supply of goods
or services or both, whether as principal or agent or in any other
capacity, but who has no fixed place of business or residence in
India;”
The foreign coach, who does not have a fixed place of business or
residence in India, occasionally undertakes transactions involving
supply of service. Hence, he will be treated as a non-resident taxable
person.
Section 24(v) of the CGST Act, inter alia states as under:
“Notwithstanding anything contained in sub-section (1) of
section 22, the following categories of persons shall be required
to be registered under this Act––
……………..
(v) non-resident taxable persons making taxable supply;
…………..”
The foreign coach has to necessarily take registration and discharge
his tax liability under forward charge. Football academy need not
pay any tax under RCM.
Q147. How to determine whether CGST/SGST needs to be paid or IGST
needs to be paid on RCM?
Ans. To determine whether a supply is liable to CGST / SGST or IGST is
dependent on the question as to whether the same qualifies as
"intra-State supply" or "Inter-State supply" under section 7/ 8 of the
IGST Act. However, generally, the following principles may be
applied -
In respect of supply of services:
First determine the location of the supplier of service as defined in
section 2(15) of the IGST Act. This is identical to section 2(71) of the

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CGST Act. Then determine the place of supply of services as

defined in section 12 of the IGST Act
As per section 7(3) of IGST Act, supply of services, where the
location of the supplier and the place of supply is in:-
(a) two different States;
(b) two different Union territories; or
(c) a State and a Union territory,
shall be treated as a supply of services in the course of inter-State
trade or commerce.
Otherwise, it will be treated as intra-State transaction and
CGST/SGST shall be paid under RCM
In respect of supply of Goods:
Determine the place of supply of goods as per section 10 of IGST
Act; Location of the supplier of goods is not defined. However, it
shall be the registered office of the supplier from where the supply of
Goods takes place and from where the billing is to be done.
As per section 7(1) of IGST Act, supply of goods, where the location
of the supplier and the place of supply are in-
(a) two different States;
(b) two different Union territories; or
(c) a State and a Union territory,
shall be treated as a supply of goods in the course of Inter-State
trade or commerce.
Otherwise it will be treated as intra-State transaction and CGST/SGST
shall be paid under RCM.
In respect of both goods and services section 7(5) of the IGST Act
may also be referred among others, for transactions, which are
generally considered as inter-State, irrespective of the location of
the supplier and place of supply as above.
Q148. Whether adaptation rights in respect of a book or re-make
rights in respect of film qualify as original work for reverse
charge?

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Ans. The question comprises of two issues:

(a) Adaptation rights in respect of a book
(b) Remaking right in respect of film
Before proceeding to discuss the same, we reproduce below
section 13(1) of the Copyright Act, 1957
“13. Works in which copyright subsists.—
(1) Subject to the provisions of this section and the other provisions
of this Act, copyright shall subsist throughout India in the
following classes of works, that is to say,—
(a) original literary, dramatic, musical and artistic works;
(b) cinematograph films; and
(c) sound recording."
(a) Adaptation rights in respect of a book:
As per Serial No 9A of NN 13/2017-CTR amended vide NN 22/2019-
CTR following categories of services are covered under RCM:

Sl. Category of Supply Supplier Recipient of Service

No. of Services of service
(1) (2) (3) (4)
9A Supply of services Author Publisher located in
by an author by way the taxable territory :
of transfer or Provided that nothing
permitting the use or contained in this entry
enjoyment of a shall apply where, -
copyright covered (i) the author has
under clause (a) of taken registration
sub-section (1) of under the Central
section 13 of the Goods and Services
Copyright Act, 1957 Tax Act, 2017 (12 of
relating to original 2017), and filed a
literary works to a declaration, in the form
publisher. at Annexure I, within
the time limit
prescribed therein, with

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 Reverse Charge Mechanism

Sl. Category of Supply Supplier Recipient of Service

No. of Services of service
(1) (2) (3) (4)
the jurisdictional CGST
or SGST
Commissioner, as the
case may be, that he
exercises the option to
pay central tax on the
service specified in
column (2), under
forward charge in
accordance with
section 9(1) of the
CGST Act, under
forward charge, and to
comply with all the
provisions of CGST
Act, as they apply to a
person liable for paying
the tax in relation to
the supply of any
goods or services or
both and that he shall
not withdraw the said
option within a period
of 1 year from the date
of exercising such
option;
(ii) the author
makes a declaration,
as prescribed in
Annexure II on the
invoice issued by him
in Form GST Inv-I to
the publisher.”;

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Practical FAQ’s under GST

The question has not specified whether adoption right is in respect

of a book which is an original literary work or not.
─ If it is an original literary work, then RCM is applicable and the
tax has to be paid by the recipient of service (i.e. publisher).
However, the author can opt to pay under forward charge after
completing certain procedures as specified in column (4)
against Sl No. 9A of the above notification.
─ If it is not an original literary work then RCM is not applicable
and the author has to pay tax under forward charge
mechanism.
(b) Remaking right in respect of film:
As per Sl.No 9 of the NN 13/2017-CTR following categories of
services are covered under RCM:
Sl. Category of Supply of Supplier of Recipient of
No. Services service Service
(1) (2) (3) (4)
9. Supply of services by a Music Music company,
music composer, composer, producer or the
photographer, artist or photographer, like, located in the
the like by way of artist, or the taxable territory. ”;
transfer or permitting like
the use or enjoyment
of a copyright covered
under clause (a) of
sub-section (1) of
section 13 of the
Copyright Act, 1957
relating to original
dramatic, musical or
artistic works to a
music company,
producer or the like.
The film producer is the author of the cinematographic films and
transfer or permitting the use or enjoyment of the said copyright is
not specifically covered under the above referred clause. Hence, a
remake right for film is not covered under RCM.

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Q149. A charitable society constructs a temple for public worship. For

the purpose of the said construction, the trust received
construction material and paid freight on transportation of
construction material. Whether RCM is applicable on freight
element?
Ans. Section 9(3) of the CGST Act, which deals with levy of GST on
reverse charge, empowers Government to specify categories of
supply of goods or services or both, the tax on which shall be paid
on reverse charge basis by the recipient of such goods or services
or both by way of notification.
Accordingly, the Central Government has issued NN 13/2017-CTR
notifying various categories of services supplied by person to the
recipient of services on which tax is leviable under section 9(3) of
the CGST Act which shall be paid on reverse charge basis by the
recipient of such services.
In the said Notification at Sl. No. 1 Goods Transport Agency service
is specified. The relevant portion of the notification is as under:

Sl. Category of Supply of Supplier of Recipient of Service

No. Services service
(1) (2) (3) (4)
1 Supply of Services by a Goods (a) Any factory
goods transport agency Transport registered under or
(GTA), [who has not paid Agency governed by the
central tax at the rate of Factories Act, 1948
6%,] 1 in respect of (63 of 1948); or
transportation of goods (b) any society
by road to- registered under
(a) any factory registered the Societies
under or governed by Registration Act,
the Factories Act, 1860 (21 of 1860)
1948(63 of 1948);or or under any other
(b) any society registered law for the time
under the Societies being in force in any

1 Inserted vide Notification No. 22/2017 – Central Tax (Rate) dated 22.08.2017

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Practical FAQ’s under GST

Registration Act, 1860 part of India; or

(21 of 1860) or under (c) any co-operative
any other law for the society established
time being in force in by or under any law;
any part of India; or or
(c) any co-operative (d) any person
society established by registered under the
or under any law; or Central Goods and
(d) any person registered Services Tax Act or
under the Central the Integrated
Goods and Services Goods and Services
Tax Act or the Tax Act or the State
Integrated Goods and Goods and Services
Services Tax Act or Tax Act or the Union
the State Goods and Territory Goods and
Services Tax Act or Services Tax Act; or
the Union Territory (e) any body corporate
Goods and Services established, by or
Tax Act; or under any law; or
(e) any body corporate (f) any partnership firm
established, by or whether registered
under any law; or or not under any law
(f) any partnership firm including association
whether registered or of persons; or
not under any law (g) any casual taxable
including association person located in the
of persons; or taxable territory.
(g) any casual taxable
person.
Provided that nothing
contained in this entry
shall apply to services
provided by a goods
transport agency, by way
of transport of goods in a
goods carriage by road,
to, -

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 Reverse Charge Mechanism

(a) a Department or
Establishment of the
Central Government
or State Government
or Union territory; or
(b) local authority; or
(c) Governmental
agencies,
which has taken
registration under the
Central Goods and
Services Tax Act, 2017
(12 of 2017) only for the
purpose of deducting tax
under section 51 and not
for making a taxable
supply of goods or
services.]2

Accordingly, a charitable society being recipient of GTA is liable to

tax under Section 9(3) of the CGST Act under RCM.
Irrespective of the fact whether the trust is making any outward
supplies or not, RCM will be applicable.
Q150. In respect of services supplied by an advocate to a business
entity located in a taxable territory, tax is payable under reverse
charge by the business entity. To pay the tax the business
entity must get registered and is bound to collect tax from
every sale made and also file the returns. Is this the right
interpretation?
Ans. As per Sl. No. 2 of NN 13/2017-CTR read with Corrigendum to
NN 13/2017-CTR dated 25.09.2017, for legal services supplied by
an individual advocate, a senior advocate or firm of advocates to a
business entity located in taxable territory, the tax under reverse
charge shall be paid by the recipient of services i.e., the business

2 Inserted vide Notification No. 29/2018 – Central Tax (Rate) dated 31.12.2018 –
w.e.f.1.01.2019

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Practical FAQ’s under GST

entity. Further, on a combined reading of entries under

Sl.No.45(b)(ii) and 45(c) (iii) of NN 12/2017-CTR as amended, it can
be understood that the legal services supplied by an individual
advocate, a senior advocate or firm of advocates to a business
entity with aggregate turnover in the preceding financial year up to
which the exemption from registration is available, are exempt from
GST.
Therefore, where the business entity having aggregate turnover in
the preceding financial year below the exemption limit for
registration is availing legal services from an advocate, then it need
not register under GST for the purpose of discharging liability under
reverse charge.
Q151. A private limited company with family members as the only
promoter directors is taking director remuneration to the tune
of around 90% of its net profit after deducting TDS under
section 192 of the Income Tax Act, 1961. Whether reverse
charge applies on such remunerations being withdrawal of
profits? Can the company claim ITC of the same?
Ans. The CBIC vide Circular 140/10/2020-GST dated 10.06.2020,
specified that, the activities performed by the director can either be
in the course of employer-employee relation (i.e. a “contract of
service”) or there could be an element of “contract for service”. The
issue has been deliberated by various courts in the pre-GST regime
as well and it has been held that a director who has also taken an
employment in the company may be functioning in dual capacities,
namely, one as a director of the company and the other on the basis
of the contractual relationship of master and servant with the
company, i.e., under a contract of service (employment) entered into
with the company.
The CBIC clarified that the part of Director’s remuneration which are
declared as ‘Salaries’ in the books of a company and subjected to
TDS under section 192 of the Income Tax Act, are not taxable being
consideration for services by an employee to the employer in the
course of or in relation to his employment in terms of Sl. No. 01 of
Schedule III of the CGST Act.
In the instant case, TDS under section 192 of the Income Tax Act,
1961 has been deducted from the remuneration being paid to the

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directors. Therefore, no reverse charge applies on the said

transaction. Consequently, the question of claiming ITC does not
arise.
Q152. When independent directors receive sitting fee from the
company, is it covered under reverse charge?
Ans. Yes. Sitting fee to independent directors is covered under reverse
charge as per Sl No. 6 of the NN 13/2017-CTR, as amended, as the
said services are outside the purview of employer-employee
relationship. Therefore, the company paying such amount shall
discharge the liability under RCM.
Q153. Whether renting of motor vehicle purchased after 1.02.2019
exigible to GST under reverse charge basis? Also state whether
ITC is allowed on the same?
Ans. Sl.No. 15 to NN 13/2017-CTR has been inserted vide
NN 22/2019-CTR, which reads thus:

Sl. Category of Supplier of service Recipient of

No. Supply of Service
Services
(1) (2) (3) (4)
15 Services provided Any person other Any body
by way of renting than a body corporate
of a motor vehicle corporate, paying located in the
provided to a body central tax at the taxable territory.
corporate. rate of 2.5% on
renting of motor
vehicles with input
tax credit only of
input service in the
same line of
business

Further, the aforesaid Serial No was revised vide NN 29/2019-CTR,

which is reproduced as under:

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Practical FAQ’s under GST

Sl. Category of Supplier of Recipient of

No. Supply of service Service
Services
(1) (2) (3) (4)
15 Services provided Any person, other Any body
by way of renting than a body corporate located
of any motor corporate who in the taxable
vehicle designed supplies the territory
to carry service to a body
passengers where corporate and
the cost of fuel is does not issue an
included in the invoice charging
consideration central tax at the
charged from the rate of 6 per cent.
service recipient, to the service
provided to a body recipient
corporate.

Hence, services provided by way of renting of a motor vehicle to a

body corporate by a person other than a body corporate and does
not issue an invoice charging central tax at the rate of 6% to the
service recipient for this services and the cost of fuel is also included
in the consideration charged would fall under RCM
However, ITC claim is blocked under section 17(5) of the CGST Act,
in respect of any motor vehicle rented for transportation of persons
having approved seating capacity of not more than 13 persons
(including the driver), except when used for specified purposes such
as a supplier of vehicles or for imparting training or transportation of
passengers etc.
ITC is available to the owner of the motor vehicle in respect of
vehicle etc., if full GST at the rate of 12% is charged relating to his
rendering of the service of transportation passengers
Q154. We are into the business of city gas distribution. Several times
we are required to pay way-leave charges, permission charges
etc., for laying of pipelines to the Nagar Nigam i.e., Local
Authority. Will the same be covered under reverse charge?

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 Reverse Charge Mechanism

Ans. ‘Local Authority’ is defined under section 2(69) of the CGST Act
thus:
“(69) local authority means —
(a) a “Panchayat” as defined in clause (d) of article 243 of the
Constitution;
(b) a “Municipality” as defined in clause (e) of article 243P of
the Constitution;
(c) a Municipal Committee, a Zilla Parishad, a District Board,
and any other authority legally entitled to, or entrusted by
the Central Government or any State Government with the
control or management of a municipal or local fund;
(d) a Cantonment Board as defined in section 3 of the
Cantonments Act, 2006 (41 of 2006);
(e) a Regional Council or a District Council constituted under
the Sixth Schedule to the Constitution;
(f) a Development Board constituted under article 371 [and
article 371J] of the Constitution; or
(g) a Regional Council constituted under article 371A of the
Constitution;
The instant case falls under Serial No 5 of NN 13/2017-CTR, and is
liable to RCM under section 9(3) of the CGST Act:

Sl. Category of Supply Supplier of Recipient of

No. of Services service Service
(1) (2) (3) (4)
5 Services supplied by Central Any business
the Central Government, entity located
Government, State State in the
Government, Union Government, taxable
territory or local Union territory or territory.
authority to a local authority
business entity
excluding, -

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Practical FAQ’s under GST

Sl. Category of Supply Supplier of Recipient of

No. of Services service Service
(1) (2) (3) (4)
(1) renting of
immovable
property, and
(2) services specified
below-
(i) services by the
Department of
Posts by way of
speed post,
express parcel
post, life
insurance, and
agency services
provided to a
person other than
Central
Government,
State
Government or
Union territory or
local authority;
(ii) services in
relation to an
aircraft or a
vessel, inside or
outside the
precincts of a port
or an airport;
(iii) transport of goods
or passengers.
Therefore, the said transactions of services supplied by the local
authorities to the business entity shall be covered under reverse
charge.

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 Reverse Charge Mechanism

Q155. When there are exempted, nil rated or zero-rated supplies in our
total turnover, why is RCM applicable, even though we are
paying GST on the total turnover?
Ans. The applicability of reverse charge is based on the provisions of
section 9(3) and section 9(4) of the CGST Act, / section 5(3) and
section 5(4) of the IGST Act, respectively, which mandate the
recipient to pay tax under reverse charge on inwards supplies of
goods or services or both, received by the registered person (i.e.,
recipient) on the specific supplies of goods, services or both as
notified. Hence, the provisions of reverse charge are not linked to
the nature and components of the total turnover.
Q156. A registered scrap dealer having turnover exceeding ` 3 crores
is buying goods from various junk / scrap dealers and rag
pickers like nylon, polyester waste etc., who are not registered
under GST. What GST liability will arise under reverse charge?
Ans. Section 9(4) of the CGST Act, covers provisions on RCM in case of
inward supplies being made by unregistered persons. Further,
effective from 01.02.2019, reverse charge will be applicable only for
specified categories of goods or services or both received from
unregistered supplier for a specified class of registered persons as
notified. In this regard, Notification no. 07/2019-Central Tax(Rate)
dated 29.03.2019 has been issued covering specific supplies
received from unregistered persons by specific recipients, effective
from 01.04.2019.
The procurement from unregistered scrap dealers by a registered
scrap dealer shall not be covered under reverse charge under
section 9(4) of the CGST Act, 2017, as it is not covered under
Notification 07/2019-Central Tax(Rate) dated 29.03.2019.
Q157. A registered person has received services of goods
transportation on 15.10.2020, whereas, the invoice of the
transporter is dated 10.11.2020 and the payment to him is made
on 25.11.2020. However, the company has made provision of
transportation expenses in October 2020 itself. When GST
liability arises under reverse charge under section 9(3) of the
CGST Act?

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Practical FAQ’s under GST

Ans. Section 13(3) of the CGST Act, identifies the time of supply of
services in case of reverse charge (i.e., in the hands of recipient) as
the earliest of the following:
a. Date on which payment is debited from the bank account
b. Date of payment entry in the books of accounts
c. Within 60 days from the date of invoice
Further, in case the above-mentioned dates are not available, then
the date of entry in the books of accounts of the recipient shall be
considered as the time of supply. Therefore, in the said case, the
time of supply shall be on 25.11.2020, being earliest of the following
dates:
a. Date on which payment is debited from the bank account –
25.11.2020
b. Date of payment entry in the books of accounts – 25.11.2020
c. Within 60 days from the date of invoice – 09.01.2021
Q158. EPC Company hires a GTA for supply of raw material from two
mines in the State. The project to which the raw material was to
be supplied was in the same State. The EPC Company is also
registered in the same State. However, the GTA is registered in
another State. The GTA hires individual truckers and gets the
supplies done. GST is being paid by EPC Company under
reverse charge on the invoices raised by the GTA. Would the
GTA also be liable under reverse charge on supplies received
from the individual truckers?
Ans. The transaction between EPC Company and GTA falls under
Sl. No. 22 of NN 12/2017-CTR, (extracted below) and is considered
to be exempted intra-State supply:

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 Reverse Charge Mechanism

Sl. Chapter, Description of Rate Condition

No. Section, Services (per
Heading, cent.)
Group or
Service Code
(Tariff)

(1) (2) (3) (4)

22 Heading 9966 or Services by way of Nil Nil

Heading 9973 giving on hire -
(a) to a State
Transport
Undertaking, a
motor vehicle
meant to carry
more than twelve
passengers; or
(b) to a
goods transport
agency, a means
of transportation
of goods.
The individual truck owner who does not issue a consignment note
is not a GTA. Therefore, the services rendered by him are exempt
and hence there is no necessity to pay tax under RCM.
Further under the erstwhile service tax law in the following cases, it
has been held that when services of transport of goods are done by
individual truck operators (and not a GTA issuing a consignment
note) the services are not liable to service tax:
(a) CCE v. Kanaka Durga Agro Oil Products Pvt. Ltd 2009 (15)
S.T.R. 399 (Tri. -Bang.)
(b) CCE v. Shanti Fortune (I) Pvt. Ltd. 2010 (19) S.T.R. 883 (Tri. -
Chennai)
(c) Laxminarayana Mining Co. v. CST 2010 24 STT 6

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Practical FAQ’s under GST

The above decisions may hold good under the GST law as well,
since the scheme of rate / exemption entries for transport of goods
by road are similar to that under the erstwhile service tax law
Therefore, in the said case, the GTA shall not be required to pay
GST on inward supplies being received from individual truckers.
Q159. A copyrighted song composed by a registered music composer
has been supplied to a registered music company. The music
composer has paid tax under forward charge. Is it proper
compliance?
Ans. No. Section 2(98) of the CGST Act defining ‘reverse charge’ casts
the liability of payment of tax on the recipient of the supply.
Therefore, in the instant case, even though the supplier i.e., music
composer has paid the taxes under forward charge, it does not
absolve the recipient i.e., the music company from discharging
liability under reverse charge.
Q160. Whether an individual providing bus service to a school run
under a Trust for carrying out transportation services of
students is covered under reverse charge or forward charge?
Ans. As per Sl. No. 15 of NN 13/2017-CTR as amended by NN 29/2019-
CTR, following categories of service are covered under RCM:

Sl. Category of Supply Supplier of Recipient of

No. of Services service Service
(1) (2) (3) (4)
15 Services provided by Any person, Any body
way of renting of any other than a corporate
motor vehicle body corporate located in the
designed to carry who supplies taxable
passengers where the service to a territory
the cost of fuel is body corporate
included in the and does not
consideration issue an
charged from the invoice
service recipient, charging
provided to a body central tax at
corporate. the rate of 6

152
 Reverse Charge Mechanism

Sl. Category of Supply Supplier of Recipient of

No. of Services service Service
(1) (2) (3) (4)
per cent. to the
service
recipient
In the instant case, the school not being a body corporate recipient
is not covered under reverse charge.
Further, as per Sl. No. 66 of NN 12/2017-CTR, (extracted below) it is
considered to be exempted intra-State supply:

Sl. Chapter, Description of Rate Condition

No. Section, Services (per
Heading, Group cent.)
or Service Code
(Tariff)
(1) (2) (3) (4)
66 Heading 9992 Services provided - Nil Nil
(a) by an educational
institution to its
students, faculty
and staff;
(b) to an
educational
institution, by
way of,-
(i) transportation of
students, faculty
and staff;
(ii) catering,
including any mid-
day meals
scheme
sponsored by the
Central
Government,

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Practical FAQ’s under GST

Sl. Chapter, Description of Rate Condition

No. Section, Services (per
Heading, Group cent.)
or Service Code
(Tariff)
(1) (2) (3) (4)
State
Government or
Union territory;
(iii) security or
cleaning or
housekeeping
services
performed in such
educational
institution;
(iv) services relating
to admission to,
or conduct of
examination by,
such institution;
up to higher
secondary:
Provided that
nothing contained in
entry (b) shall apply
to an educational
institution other
than an institution
providing services
by way of pre-
school education
and education up to
higher secondary
school or
equivalent.

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 Reverse Charge Mechanism

Hence, the service of transportation of students, faculty and staff

provided to an educational institution providing pre-school education
and education up to higher secondary school or equivalent is not
chargeable to tax. Therefore, in the instant case, the transporter will
not be liable under forward charge as well.
Q161. If I am a registered person in Mumbai and have given a vessel
on hire at Sri Lanka, whether it will qualify as export of service?
If yes, state whether RCM provisions are applicable?
Ans. The said transaction would amount to export of services, if all the
following conditions stipulated in section 2(6) of the IGST Act are
complied with:
“export of services” means the supply of any service when, -
(i) the supplier of service is located in India;
(ii) the recipient of service is located outside India;
(iii) the place of supply of service is outside India;
(iv) the payment for such service has been received by the supplier
of service in convertible foreign exchange [or in Indian rupees
wherever permitted by the Reserve Bank of India]; and
(v) the supplier of service and the recipient of service are not
merely establishments of a distinct person in accordance with
Explanation 1 in section 8;”
Once, the said supplies fall under the category of export of services,
then such supplies will fall under the zero-rated supplies.
However, RCM is not applicable in respect of “export of services”.
Q162. Where an Institution has availed the services of man power
recruitment agency like data entry operators etc., (other than
security services), whether GST is leviable? If yes, state
whether RCM provisions are applicable?
Ans. When the services like manpower recruitment and man power
supply services, other than security services (services provided by
way of supply of security personnel) are happening inside the
taxable territory, such manpower supply other than security services
(services provided by way of supply of security personnel) are not to
be considered as liable to reverse charge under GST

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Practical FAQ’s under GST

Q163. Freight is paid to GTA without any GST component on the

invoice by a registered person in Delhi. The registered person
charges the same in his tax invoice to his customers. Is GST to
be paid by the supplier or his customers?
Ans. As per Sl. No. 1 of NN 13/2017-CTR, as amended, the liability under
section 9(3) of the CGST Act towards reverse charge lies on the
recipient of the services from the GTA. Further, as per explanation
(a) to the said notification, the person who pays or is liable to pay
freight for the transportation of goods by road in goods carriage,
located in the taxable territory shall be treated as the recipient of the
service. Therefore, in the instant case, as the freight has been paid
by the supplier himself, he shall be liable to pay tax under reverse
charge.

156
 Chapter 4
Composition Scheme
Q164. What is the threshold limit for opting Composition Scheme?
State the conditions to be fulfilled for opting Composition
Scheme? Whether a composition taxpayer can make an inter-
State supply?
Ans. Section 10 of the CGST Act, provides for a registered person (other
than casual taxable person & non-resident taxable person) to opt for
payment of taxes under a scheme of composition, the conditions
attached thereto and the persons who are entitled, but not
mandated, to make payment of tax under the composition Scheme.
Tax payment under this scheme is an option available to certain
registered person depending upon whether the registered person is
a supplier of goods or a supplier of service. The threshold limit for
a registered person (other than casual taxable person and non-
resident taxable person) to opt for composition scheme is as
under:

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Practical FAQ’s under GST

➢ For the purpose of composition scheme under section 10 of the

CGST Act, the special category States are (Notification No.
14/2019 – Central Tax, dated 7.03.2019):
o Arunachal Pradesh
o Manipur
o Meghalaya
o Mizoram
o Nagaland
o Sikkim
o Tripura
o Uttarakhand
Composition Scheme in case of Supply of goods along with
specified supply of service
➢ A person, who is getting registered under GST, can opt for
composition scheme at the time of filing the registration
application under GST. The turnover limit for this purpose will be
assumed to be not exceeding the threshold limit in the current
financial year. Aggregate turnover includes all types of supplies
but not inward supplies liable to reverse charge calculated on an
all-India basis.
➢ Composition scheme is not available to manufacturers of such
goods [or services in case of Section 10(2A) as may be notified
by the Government on the recommendations of the Council. In
this regard, following goods have been notified vide Notification
No. 8/2017-Central Tax dated 27.06.2017 as amended:
o Ice cream and other edible ice, whether or not containing
cocoa,
o Pan masala,
o Tobacco and manufactured tobacco substitutes.
o Aerated Water

158
 Composition Scheme

(Notification No. 14/2019-Central Tax, dated 7.03.2019 read

with Notification No. 43/2019- Central Tax, dated 30-9-2019).
➢ An Assessee applying for Composition Scheme under Section
10(1) of the CGST Act, cannot be a supplier of services except
when he satisfies certain conditions specified in the second
proviso to section 10(1) of the CGST Act.
➢ As per second proviso to section 10(1) of the CGST Act,
registered person who is a supplier of goods but makes some
supply of services is also eligible for composition scheme
provided his supply of services [other than those referred to in
clause (b) of paragraph 6 of Schedule II], are up to 10% of
turnover in a State or Union Territory in the preceding financial
year or ` 5 Lakhs, whichever is higher. For this purpose, the
value of exempt supply of services by way of interest on
deposits, loans shall not be considered.
Example: Mr. A runs a medical shop. He also receives rental
income on commercial property. The income statement of Mr. A
for F.Y. 2019-20 is as under:
Turnover of medical shop – ` 1.4Crores
Rental Income from commercial property – ` 8 Lakhs
Interest received on deposits – ` 3 Lakhs
Can Mr. A opt for composition scheme for F.Y. 2020-21?
Mr. A is supplier of goods and supplier of services. For eligibility
of composition scheme, the supply of service shall not exceed
10% of turnover in a State or Union Territory or ` 5 Lakhs
whichever is higher.
Also, for the purpose of computing turnover in a State or Union
Territory, the value of exempt supply of services by way of
interest on deposits, loans shall not be considered. Thus, for the
purpose of calculation of turnover in a State or Union Territory,
interest received on deposits amounting to ` 3 lakhs will not be
considered.
The limit for supply of service is 14.80 lakhs [1.48 crores*10%]
or ` 5 lakhs whichever is higher. The rental income is ` 8 lakhs

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Practical FAQ’s under GST

only which is within the threshold limit for supply of service. The
turnover calculated above does not include the interest received
from deposits of ` 3 lakhs as per the Explanation to the proviso.
Thus, Mr. A is eligible for opting for the Composition Scheme.
➢ The rate of tax prescribed for composition dealers is as below –
o 2% of turnover in a State in case of manufacturer
o 5% of turnover in a State in case of persons engaged in
supply, by way or as part of a service, of goods being food
for human consumption and works contract services
o 1% of turnover in a State for other suppliers
o The registered person is not engaged in making any supply
of goods or services which are not leviable to tax under this
Act (Alcohol for human consumption, petroleum products).
o The registered person is not engaged in making any
inter-State outward supplies of goods or services.
Composition Scheme in case of supplier of service
➢ A registered person can opt for composition scheme under
section 10(2A) of the CGST Act only if he is not eligible to opt to
pay tax under sub-section (1) and sub-section (2) of Section 10
thereof.
➢ This Scheme has been notified w.e.f. 01-01-2020
➢ The rate of tax prescribed is 6% of the turnover in a State or UT.
Common Conditions
➢ Where the registered person has multiple registrations (Within
the State / across the country) under the same PAN, then
composition scheme will be applicable to all registrations under
same the PAN.
➢ The registered person shall not collect tax from the recipient on
supplies made by him.
➢ The registered person shall not be entitled to any credit of input
tax.

160
 Composition Scheme

➢ Reverse charge under Section 9(3) is payable by the registered

person.
➢ The registered person should neither be a casual taxable
person nor a non-resident taxable person
➢ The registered person is not engaged in making any supply of
goods or services through an electronic commerce operator who
is required to collect tax at source under section 52.
➢ The option availed shall lapse with effect from the day on which
the aggregate turnover crosses the limit prescribed.
➢ Aggregate turnover of last F.Y. to be counted for the threshold
limit.
If the composition dealer engages in making any inter-state outward
supply of goods or service, then he shall not be eligible for opting
this Scheme.
Hence, a composition taxpayer is not allowed to engage himself in
making inter-State supplies of goods or services of any amount.
Q165. I am a software engineer registered under GST as composition
taxpayer having turnover of ` 68 lakhs. I have invested my
savings in bank and interest earned is about ` 10 lakhs. Will I
be liable to pay tax at normal rate of 18% for the portion
exceeding ` 75 lakhs?
Ans. As per explanation 1 to section 10 of CGST Act(inserted vide the
Finance (No. 2) Act, 2019, for the purpose of aggregate turnover the
value of exempt supply of services by way of interest on deposits,
loans shall not be considered.
Further, as per explanation 2 of section 10 of CGST Act (inserted
vide the Finance (No. 2) Act, 2019, for the purpose of determining
tax payable by a person, the expression “turnover in a State or
Union territory” shall not include the value of exempt supply of
services provided by way of extending deposits, loans or advances
in so far as the consideration is represented by way of interest or
discount.’.
Thus, as per explanations 1 and 2, the interest earned on savings
bank account will neither be part of turnover for opting Composition

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Practical FAQ’s under GST

Scheme nor be taxable under the Composition Scheme. Hence, no

tax needs to be paid on interest of ` 10 Lakhs under GST
Composition Scheme.
Q166. ABC is a business organization registered under the same PAN
in Uttar Pradesh and a special category State. What will be the
threshold limit for opting the Composition Scheme under
section 10?
Ans. The threshold limit for opting Composition Scheme for registered
person in other than special category State is ` 1.5 Crores.
The proviso to section 10(2) of CGST Act says that where more than
one registered person are having the same Permanent Account
Number (issued under the Income-tax Act, 1961), the registered
person shall not be eligible to opt for the Scheme under section
10(1) unless all such registered persons opt to pay tax under that
sub-section.
Now, if we assume the turnover of ABC to be ` 80 Lakhs, ABC will
not be eligible to opt for Composition Scheme in the special
Category State as the threshold limit in special Category State is
` 75 Lakhs. Though, the threshold limit for other than special
category State is ` 1.5 Crores, the proviso to section 10(2) restricts
ABC from opting the Composition Scheme in only one State.
Thus, the limit for opting of Composition Scheme for ABC (having
business in special Category State as well as other than special
category States) shall be considered as ` 75 Lakhs taking a prudent
approach.
Q167. Tax rate under Composition Scheme in respect of suppliers
other than manufacturers is 1% of taxable supplies of goods.
"Taxable supply" means supplies leviable to tax. "Leviable
supply" under section 9 exempts only Alcohol and petroleum
products. If so what is the difference in tax rate of 0.5% CGST
and 0.5% SGST applicable between the "manufacturer" and
"other suppliers" in section 10? Whether composition levy
under section 10 is applicable to exempt supply? Can a person
who has opted for Composition Scheme supply both exempt
and taxable supplies? Whether he has to pay tax on total supply
or only taxable supply?

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 Composition Scheme

Ans. The composition rates for different categories of registered persons

are as under:
Sr. Category of registered Rate of tax (CGST+
no. persons SGST/UTGST)
1. Manufacturers, other than 1% of the turnover in State
manufacturers of ice cream, or Union territory
tobacco, pan masala, goods
notified by Government
2. Suppliers making supplies 5% of the turnover in the
referred to in clause (b) of State or Union territory
paragraph 6 of Schedule II
(Restaurant service)
3. Supplier of services (Other 6% of the turnover in the
than above) State or Union territory
4. Any other supplier eligible 1% of the turnover of
for composition levy under taxable supplies of (goods
section 10 and the and services) in the State or
provisions of this Chapter Union territory
(Traders, wholesalers, etc.)
GST was payable on exempted goods as envisaged in the
Composition Scheme effective from 1st July 2017. Since, tax was
payable on exempted goods, large number of registered persons
(grocery shops selling tax free food grains, milk, etc.) were not
opting for the Composition Scheme and in turn large part of targeted
registered persons remained outside the purview of the Composition
Scheme.
To overcome this situation, the GST Council in its 23rd meeting held
on 10th November 2017 at Guwahati, decided that the tax should not
be levied on exempted goods as far as Sr. No. 4 above (Any other
supplier eligible for composition levy under section 10) was
concerned.
To give effect to the decision of the Council, from 1st January 2018
the original wording of rule 7 of the CGST Rules which specified half
percent of the “turnover in the State or Union Territory” was replaced
with “turnover of taxable supplies in the State or Union Territory”.

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Practical FAQ’s under GST

However, some anomalies in the wordings leading to the

interpretation which were not intended by the Council have been
rectified later.
As per the definition under section 2(108), taxable supply means a
supply of goods or services or both which is leviable to tax under
this Act. Goods not leviable under the Act are alcohol for human
consumption and petroleum products. Thus, going by the meaning
as defined above, even after amendment, exempt supplies are
taxable under the Composition Scheme.
However, if we go through the definition contained in section 2(112),
“turnover in State” or “turnover in Union territory” means the
aggregate value of all taxable supplies (excluding the value of
inward supplies on which tax is payable by a person on reverse
charge basis) and exempt supplies made within a State or Union
territory by a taxable person, exports of goods or services or both
and inter-State supplies of goods or services or both made from the
State or Union territory by the said taxable person but excludes
central tax, State tax, Union territory tax, integrated tax and cess.
Here taxable supplies and exempt supplies are separately mentioned
and underlying meaning for taxable supplies can be drawn as supplies
other than exempt supplies.
To that extent, there is possibility of two interpretations for the term
‘taxable supplies’ under sections 2(108) and 2(112) of the CGST
Act.
In rule 7 as well as section 10, original wording used was “turnover
in a State or Union Territory” and while making amendment to rules,
wordings used were “turnover of taxable supplies in the State or
Union Territory”.
Thus, as per the definition of ‘taxable supplies’, exempt supplies are
included in the definition, but in the definition of turnover in State the
term taxable supplies is intended to exclude exempted supply as the
same is separately mentioned.
On a congenial reading of law and considering the intention of the
Council, the registered person other than manufacturers, service
providers and restaurant service providers, should pay tax on
turnover excluding exempt supplies for the purpose of composition
levy.

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 Chapter 5
Time of Supply
Q168. Whether advance received for supply of goods or services is
liable to GST?
Ans. The Government has come out with Notification No. 66/2017 dated
15.11.2017 [“NN 66/2017-CTR”], whereby all suppliers of goods
who have not opted for Composition Scheme, have been exempted
from the burden of paying GST on advances received. For such
categories of taxpayers, time of supply would arise only at the
time of issue of invoice and they need to discharge GST liability
accordingly.
The above Notification, is applicable only in cases of advances
received with respect to goods, But the supplier of services are
required to pay GST at the time of receipt of advances itself,
and not when the invoice is issued.
Q169. Whether GST will be charged on advance received for annual
maintenance contract?
Ans Annual maintenance contract is supply of service.
In case of advance received for supply of service, the time of supply
is fixed at the point when the advance is received to the extent of
advance so received, irrespective of the fact whether the supply is
made or not.
NN 66/2017-CTR, which gives exemption in respect of advance
received against supply of goods from the burden of paying GST
does not exempt advance received in respect of services. AMC
being supply of services, GST is required to be paid at the time
of receipt of advances itself, and not when the invoice / Monthly
statement is issued.
Q170. What will be time of supply with respect to land owner’s unit at
the time of completion?

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Ans. Schedule II of the CGST Act sets out the activities which are treated
to be supply of goods or supply of service. It covers the following
entry related to construction done by developers:
In terms of Entry No. 5(b) the following shall be treated as supply of
services:
“construction of a complex, building, civil structure or a part
thereof, including a complex or building intended for sale to a
buyer, wholly or partly, except where the entire consideration
has been received after issuance of completion certificate,
where required, by the competent authority or after its first
occupation, whichever is earlier.”
Further vide Entry 6 (a) works contract, being contract for building,
construction of any immovable property, which involves transfer of
property in goods [as goods or in any other form] in the course of
execution of contract, shall be treated as a supply of service.
It may be noted that Schedule III to GST law sets out activities which
are treated neither as supply of goods nor as supply of service. Therein
Entry No. 5-covers sale of land and sale of completed
building/constructed unit, which is consequently excluded from the levy
of tax.
In this backdrop, it is seen that in terms of the JDA, the developer
would engage in providing construction service to the landlord, in
exchange for which the landowner may provide the
land/development rights to develop the scheduled property to the
developer. It appears that there is barter done by way of
construction services supplied by developer against the non-
monetary consideration of the land/development rights given by land
owner. The developer is engaged in the construction activity done
for landlord, in exchange for the consideration of development
rights, received prior to completion of construction, which may be
treated as supply of service covered by Schedule II Entry 5.
Similarly, the arrangement between the developer and landlord
whereby the building/unit’s construction work is done by the
developer, using material and labour, after entering into JDA
with land owner, may be said to be a works contract service under
GST.

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Time of Supply: –
Notification No.06/2019- Central Tax (Rate) dated 29.03.2019 inter
alia stated that “a promoter who receives development rights or
Floor Space Index(FSI) (including additional FSI)on or after 1st April,
2019 for construction of a project against consideration payable or
paid by him, wholly or partly, in the form of construction service of
commercial or residential apartments in the project or in any other
form including in cash”, the liability to pay GST shall arise on the
date of issuance of completion certificate or on its first
occupation, whichever is earlier.
GST liability arises at the time when the JDA agreement is entered
into and consideration of the development rights was received, in
line with section 13(2), which provides that the GST liability arises
on supply of services at the time of receipt of payment. The receipt
of development rights could be treated as receipt of payment of non-
monetary consideration. .
However, in accordance with Notification No.04/2018- Central Tax
(Rate) dated 25.01.2018 the tax on consideration received in the
form of construction service provided by the developer to land owner
would be liable to be paid, when the developer transfers possession
or the right in the constructed building or apartments to the land
owner by entering into a conveyance deed or similar instrument like
for example the allotment letter. Further it is pertinent to note that
such time of supply provision is not applicable with respect to the
development rights supplied on or after 1st April, 2019 as stipulated vide
Notification No. 23/2019-Central Tax (Rate), dated 30.09.2019
w.e.f.1-10-2019.
Q171. What will be time of supply in the case of works contract where,
as per work order it is specifically mentioned and agreed by
contractor that the invoice will be raised only after completion
of work contract to the satisfaction of architect of the
contractee and only thereafter payment will be done?
Ans. As per Section 2(33) of the CGST Act “Continuous supply of
services” means a supply of services which is provided, or agreed to
be provided, continuously or on recurrent basis, under a contract, for

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a period exceeding three months with periodic payment obligations

and includes supply of such services as the Government may,
subject to such conditions, as it may, by notification, specify.
Issue of Invoice as per Section 31(5) of the CGST Act
There is no periodic payment obligation. Works contract referred
here is not a continuous supply of service.
Time of supply as per section 13(2) of the CGST Act
The time of supply of services shall be the earliest of the following
dates, namely:-
(a) the date of issue of invoice by the supplier, if the invoice is
issued within the period prescribed under section 31 or the date
of receipt of payment, whichever is earlier; or
(b) the date of provision of service, if the invoice is not issued within
the period prescribed under section 31 or the date of receipt of
payment, whichever is earlier; or
(c) ...............................................”
As per rule 47 of the CGST Rules, the invoice, in the case of taxable
supply of services, shall be issued within a period of 30 days from
the date of the supply of service.
As per the information given, supply of service is complete only
when the architect of the contractee is satisfied with the completion
of the work. Hence, as per rule 47 thereof, invoice is to be raised
within 30 days from the time when the architect of the contractee is
satisfied with the completion of the work. If it is so raised within 30
days, time of supply will be the date of issue of invoice and if the
invoice is not raised within 30 days as mentioned above the time of
supply will be the time when the architect of the contractee is
satisfied with the completion of work. Further, as per the information
given the payment is to be released only after the architect is
satisfied with the completion of the work, Hence, no payment will be
received till such time the architect is satisfied with the completion of
the work.

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Q172. What will be time of supply, if a Chartered Accountant is

providing project finance services where payments are to be
received in stages, which are specified in the appointment
letter?
Ans. As per 2(33) of the CGST Act, “Continuous supply of services”
means a supply of services which is provided, or agreed to be
provided, continuously or on recurrent basis, under a contract, for a
period exceeding three months with periodic payment obligations
and includes supply of such services as the Government may,
subject to such conditions, as it may, by notification, specify.
Project financing service provided by a Chartered Accountant will be
considered as continuous supply of service, if it satisfies all the
conditions specified in the definition, Provisions applicable to
“Continuous supply of service” will therefore apply to project
financing services provided by a Chartered Accountant.
Issue of Invoice as per section 31(5)
As per section 31(5) of the CGST Act, in case of continuous supply
of service: -
• Where the due date of payment is ascertainable or
predetermined from the “Contract” then the invoice shall be
issued on or before the due date of payment.
• Where the due date of payment is not ascertainable or not
predetermined from the Contract then the invoice shall be
issued before or at the time when the supplier of service
receives payment.
• Where the payment is linked to the “Completion of an event” the
invoice shall be issued on or before the date of completion of
that event.
Conclusion: From the above provisions it can be concluded that in
the given scenario, where payments are to be received in stages by
a Chartered Accountant, which is specified in the appointment letter,
as per section 31(5) the invoice has to be issued on or before
the due date of payment, since the due date is ascertainable or
predetermined from the contract.

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Time of Supply
As per section 13(2) of CGST Act read with section 31(5) thereof,
the time of supply of service for continuous supply of service shall
be the earliest of the following dates: -
• If the invoice is issued within the prescribed period under
section 31(5), the date of issue of invoice by the supplier or the
date of receipt of payment whichever is earlier ; or
• If the invoice is not issued within the prescribed period under
section 31(5), then the date of provision of service or the date of
receipt of payment, whichever is earlier.
Q173. What will be the time of supply in a case of construction of road
for Municipal Corporation of Delhi (MCD)?
Ans. Under GST laws, construction of roads, bridges, dams, canals etc.
fall under the definition of works contract.
As per section 2(119) of the CGST Act “works contract means a
contract for building, construction, fabrication, completion, erection,
installation, fitting out, improvement, modification, repair,
maintenance, renovation, alteration or commissioning of any
immovable property wherein transfer of property in goods (whether
as goods or in some other form) is involved in the execution of such
contract”
Further, as per Entry No.6 (a) of Schedule II to the CGST Act, works
contracts as defined in section 2(119) of the CGST Act shall be
treated as a supply of services. Thus, there is a clear demarcation of
a works contract as a supply of service under GST.
It is important to determine the time of supply to ascertain the point
in time where the liability to pay GST arises. Construction contracts
have a long gestation period, and as a result, construction of roads,
bridges and canals may be regarded as continuous supply of
service.
As per section 2(33) of the CGST Act “Continuous supply of service”
means a supply of services which is provided, or agreed to be
provided, continuously or on recurrent basis, under a contract, for a
period exceeding three months with periodic payment obligations

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and includes supply of such services as the Government may,

subject to such conditions, as it may, by notification, specify.
Issue of invoice for such continuous supply of service needs to be
done as per the provisions of section 31(5) of the CGST Act.
As per section 31(5) of CGST Act, in the case of continuous supply
of service: -
• Where the due date of payment is ascertainable or
predetermined from the “Contract” then the invoice shall be
issued on or before the due date of payment
• Where the due date of payment is not ascertainable or not
predetermined from the contract then the invoice shall be issued
before or at the time when the supplier of service receives
payment.
• Where the payment is linked to the “Completion of an event” the
invoice shall be issued on or before the date of completion of
that event.
Time of supply as per section 13(2) of the CGST Act
Depending on which category the works contract allotted by MCD
falls out of the three mentioned above, the time of supply will be
determined as per section 13(2) of CGST Act according to which
the time of supply of service for continuous supply of service shall
be the earliest of the following dates: -
• If the invoice is issued within the prescribed period under
section 31(5), the date of issue of invoice by the supplier or the
date of receipt of payment whichever is earlier; or
• If the invoice is not issued within the prescribed period under
section 31(5), then the date of provision of service or the date of
receipt of payment whichever is earlier.
Q174. How to determine time of supply, if the purchaser is liable to
pay tax under RCM?
Ans. In terms of section 12 (3) of the CGST Act, in case of supply of
goods, the time of supply will be the earliest of the following–
(a) the date of the receipt of goods; or

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(b) the date of payment as entered in the books of account of the

recipient or the date on which the payment is debited in his bank
account, whichever is earlier; or
(c) the date immediately following thirty days from the date of issue
of invoice or any other document, by whatever name called, in
lieu thereof by the supplier :
Provided that where it is not possible to determine the time of
supply under clause (a) or clause (b) or clause (c), the time of
supply shall be the date of entry in the books of account of the
recipient of supply.
NOTE-.*This point is no more applicable based on NN 66/2017-CTR
In terms of section 13 (3) of the CGST Act, in case of supply of
services, the time of supply is the earliest of the following –
(a) the date of payment as entered in the books of account of the
recipient or the date on which the payment is debited in his bank
account, whichever is earlier; or
(b) the date immediately following sixty days from the date of issue
of invoice or any other document, by whatever name called, in
lieu thereof by the supplier.
Provided that where it is not possible to determine the time of supply
under clause (a) or clause (b), the time of supply shall be the date of
entry in the books of account of the recipient of supply.
Provided further that in case of supply by associated enterprises,
where the supplier of service is located outside India, the time of
supply shall be the date of entry in the books of account of the
recipient of supply or the date of payment, whichever is earlier.
Q175. What will be the time of supply in case works contract service
where partial work is completed and invoice is not issued
against the same within the stipulated time as provided in
section 31 of the CGST Act?
Ans. As per section 13(2) of the CGST Act, the time of supply of services
shall be the earliest of the following dates, namely: —

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(a) the date of issue of invoice by the supplier, if the invoice is

issued within the period prescribed under section 31 or the date
of receipt of payment, whichever is earlier; or
(b) the date of provision of service, if the invoice is not issued within
the period prescribed under section 31 or the date of receipt of
payment, whichever is earlier; or
(c) the date on which the recipient shows the receipt of services in
his books of account, in a case where the provisions of clause
(a) or clause (b) do not apply:
Explanation.-For the purposes of clauses (a) and (b)––
(i) the supply shall be deemed to have been made to the extent it
is covered by the invoice or, as the case may be, the payment;
(ii) “the date of receipt of payment” shall be the date on which the
payment is entered in the books of account of the supplier or the
date on which the payment is credited to his bank account,
whichever is earlier.
For example: A works contractor provided taxable services on
01.12.2020. An invoice towards value of ` 2 lakhs was issued on
01.12.2020. The payment is received against the same and entered
in the books on 10.11.2020. It is realized by bank by 13.11.2020
In this case
Date of provision of service: 01.12.2020
Date of invoice: 01.12.2020
Last date of Invoice: 30.12.2020 (Not beyond 30 days from the date
of provision of service)
Date of receipt of payment-
- Book entry: 10.11.2020
- Credit in bank: 13.11.2020
- Date of receipt of payment – 10.11.2020
Therefore, in case of works contract service where partial work is
completed, if no invoice is issued against the same within time as

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per section 31, the time of supply would be as per section 13(2)(b)
i.e. earliest of date of provision/completion of service or date when
the payment is received.
Date of time of supply in the instant case will be 10.11.2020
being the earlier of date of invoice or date of receipt of
payment.
Q176. How to determine the date of supply in respect of long term
contract, where payment is received on the basis of completion
of certain work and work completed 1 month before receipt of
payment as per Government internal process? Bills are not
prepared in these cases.
Ans. As per section 2(33) of CGST Act, “Continuous supply of services” “
means a supply of services which is provided, or agreed to be
provided, continuously or on recurrent basis, under a contract, for a
period exceeding three months with periodic payment obligations
and includes supply of such services as the Government may,
subject to such conditions, as it may, by notification, specify.
Issue of Invoice as per section 31(5)
As per section 31(5) of the CGST Act in case of continuous supply
of service: -
• Where the due date of payment is ascertainable or
predetermined from the “Contract” then the invoice shall be
issued on or before the due date of payment.
• Where the due date of payment is not ascertainable or not
predetermined from the contract then the invoice shall be issued
before or at the time when the supplier of service receives
payment.
• Where the payment is linked to the “Completion of an event” the
invoice shall be issued on or before the date of completion of
that event.
Conclusion: From the above provisions it can be concluded that in
the given scenario, where payment is to be received only after
completion of certain works contract and as per section 31(5) where
the payment is linked to the “Completion of an event”, the invoice
shall be issued on or before the date of completion of that event.

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Time of supply as per section 13(2)

As per section 13(2) of the CGST Act the time of supply of service
for continuous supply of service shall be the earliest of the following
dates: -
• If the invoice is issued within the prescribed period under
section 31(5), the date of issue of invoice by the supplier or the
date of receipt of payment whichever is earlier. or
• If the invoice is not issued within the prescribed period under
section 31(5), then the date of provision of service or the date of
receipt of payment whichever is earlier.
Therefore, in the given scenario where bills/ Invoices are not
raised as per section 31(5), the time of supply would be the date
of provision of service or the date of receipt of payment,
whichever is earlier.
Q177. What will be the time of supply, if the recipient of goods has
received certain discounts for early payment to the supplier?
And who shall be liable to pay GST? Discount mentioned above
is equivalent to the saving of interest by the supplier on his
non-fund based limits from banks
Ans. Section .15 of the CGST Act, deals with the provision of discount:
According to this section the value of the supply shall not include
any discount which is given –
a) Before or at the time of the supply
if such discount has been duly recorded in the invoice issued in
respect of such supply; and will be allowed as deduction, from
the value of the supply.
Example:
Suppose a company offered discount @10% on sales of
` 10,000/-.
Discount amount would be ` 1,000/-.
If such discount amount is reflected in the tax invoice then such
discount would be allowed as deduction. Value of supply
` 10,000 (-) Discount ` 1,000.

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Hence, net value of supply on which GST is payable is ` 9,000.

Thus, when discount is mentioned in the invoice and payment is
not collected, GST on discount amount would not be applicable.
b) After the supply has been affected, if –
(i) Such discount is established in terms of an agreement
entered into at or before the time of such supply and
specifically linked to relevant invoices,
For example, an agreement that if the customer paid the
amount due within 30 days, a discount of 10% would be
applicable.
(ii) Discount is linked to the invoice
(iii) Input tax credit as is attributable to the discount on the
basis of document issued by the supplier has been reversed
by the recipient of the supply.
Thus, if the discount given for the early payment to the recipient
satisfies the conditions specified, no GST on such discounts
received by the recipient will be applicable. Recipient will have
to reverse the ITC if taken corresponding to discount amount.
From the perspective of the supplier credit note for the discount
might have been issued in the same month in which supply is
made or in any subsequent month. If the credit note is issued in
the same month, the supplier shall pay GST on the net sale
value after adjusting the discount, provided the discount allowed
satisfies various conditions mentioned in section 15 of the
CGST Act. If the credit note is issued in the subsequent months,
the supplier should report the original value of, the invoice in the
monthly return in which the invoice is raised. The value of the
credit note should be reported in the relevant table in
Form GSTR-1 and can be reduced from the gross value of
supply in Table 3 of Form GSTR-3B. The supplier should also
ensure that the recipient also reverses the ITC attributable to
the discount.
The time of supply of goods shall be governed by section 12(2) as
under:
(a) the date of issue of invoice (or the last day by which invoice
should have been issued) or

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(b) the date of receipt of payment

Whichever is earlier.
In respect of discount allowed there is no supply from the
perspective of supplier.
Q178. In case of cash back received on credit card transactions, what
shall be the time of supply - the time of utilization of the limit or
when cash back is credited cumulatively periodically by bank?
Ans. A cash back credit card transaction is a transaction for which a
cardholder receives a cash back credit. Some card companies have
categories for which they reward their cardholders when they make
purchases. For example, a cardholder may receive cash back
whenever he or she shops for groceries or fuel.
GST is not applicable to the entire outstanding on credit cards. It is
applicable only to fees and charges levied on credit cards.
Time of supply with respect to cash back received on credit card
transactions will be as per provisions of section 13 (2)(c) of the
CGST Act namely the date on which the recipient shows the receipt
of services in his books of account. Hence, time of supply in the
instant case will be when cash back is credited cumulatively by the
bank in the account of the customer.
Q179. What is the time of supply in respect of interest on delayed
payment?
Ans. Section 13 (6) of the CGST Act which deals with time of supply for
Value Addition, Interest etc., read as:
“The time of supply to the extent it relates to an addition in the value
of supply by way of interest, late fee or penalty for delayed payment
of any consideration shall be the date on which the supplier receives
such addition in value.”
For example, a supplier receives consideration in the month of
September instead of due date of July and for such delay he is
eligible to receive an interest amount of ` 1000/- and the said
amount is received on 15.8.2020. The time of supply of such amount
(` 1000/-) will be the 15.08.2020 i.e. the date on which it is received
by the supplier and tax liability on this is to be discharged by
20.09.2020.

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Value of Supply
Q180. Mr. A, a customer and an unregistered person under GST who
does not have any business related to jewellery purchased
jewellery worth ` 2,00,000 from a jeweller and also gave him
jewellery worth ` 80,000/-. State whether GST is payable on
` 2,00,000 or` 80,000/-?
Ans. ⚫ Value of taxable supply has been defined in section 15(1) of the
CGST Act thus:
“The value of a supply of goods or services or both shall be the
transaction value, which is the price actually paid or payable for
the said supply of goods or services or both where the supplier
and the recipient of the supply are not related and the price is
the sole consideration for the supply.”
• Where price is not the sole consideration, one may refer to
rule 27 of the CGST Rules, under which the value of supply of
goods or services where the consideration is not wholly in
money shall, -
(a) be the open market value of such supply;
(b) if the open market value is not available under clause (a),
be the sum total of consideration in money and any such
further amount in money as is equivalent to the
consideration not in money, if such amount is known at the
time of supply;
(c) if the value of supply is not determinable under clause (a)
or clause (b), be the value of supply of goods or services or
both of like kind and quality;
(d) if the value is not determinable under clause (a) or clause
(b) or clause (c), be the sum total of consideration in money
and such further amount in money that is equivalent to
consideration not in money as determined by the
application of rule 30 or rule 31 in that order.

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• There are two separate transactions taking place in the instant

case the first being the jewellery purchased by the customer
worth ` 2,00,000 and the second being jewellery worth ` 80,000
given by customer to the jeweller. In this case, on the first
transaction for purchase of jewellery, GST shall be payable on
the entire amount of ` 2,00,000/- (i.e. combination of the
monetary and non-monetary consideration) and in the second
transaction, if the supply by the customer is not in the course or
furtherance of the business of the customer then no GST will be
payable on ` 80,000.
Q181. Who are related persons under GST?
Ans. “Related person” has been defined in the explanation to section 15
of the CGST Act thus:
(a) persons shall be deemed to be “related persons” if —
(i) such persons are officers or directors of one another’s
businesses;
(ii) such persons are legally recognised partners in business;
(iii) such persons are employer and employee;
(iv) any person directly or indirectly owns, controls or holds
twenty-five per cent. or more of the outstanding voting
stock or shares of both of them;
(v) one of them directly or indirectly controls the other;
(vi) both of them are directly or indirectly controlled by a third
person;
(vii) together they directly or indirectly control a third person;
or;
(viii) they are members of the same family;
Further, it has been stated that the word ‘person’ will also be
including legal persons as per the comprehensive definition given
under section 2(84) of the CGST Act. Also, it has been stated that
the persons who are associated with business of one another as
sole agent or sole distributor or sole concessionaire will also be
deemed to be related persons.

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“Family” as per section 2 (49) of the CGST Act means, ––

(i) the spouse and children of the person, and
(ii) the parents, grandparents, brothers and sisters of the person if
they are wholly or mainly dependent on the said person;
Q182. If an asset is fully depreciated and does not have economical
use, and such scrapped asset is given to the clearing agent,
whether GST is leviable? If yes, what will be the value of supply
when there is no value on such asset in the books of accounts?
Ans. ⚫ In the instant case the value of supply of the asset given to
clearing agent shall be as per Rule 29 of the CGST Rules which
reads thus:-
“29. Value of supply of goods made or received through an
agent.-
The value of supply of goods between the principal and his
agent shall-
(a) be the open market value of the goods being supplied, or at
the option of the supplier, be ninety per cent. of the price
charged for the supply of goods of like kind and quality by
the recipient to his customer not being a related person,
where the goods are intended for further supply by the said
recipient
(b) where the value of a supply is not determinable under
clause (a), the same shall be determined by the application
of rule 30 or rule 31 in that order.”
“31. Residual method for determination of value of supply
of goods or services or both.
Where the value of supply of goods or services or both cannot
be determined under rules 27 to 30, the same shall be
determined using reasonable means consistent with the
principles and the general provisions of section 15 and the
provisions of this Chapter :

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 Value of Supply

Provided that in the case of supply of services, the supplier may

opt for this rule, ignoring rule 30.”
• Ideally the value of supply in such a case is the transaction
value as per section 15(1) of the CGST Act which reads:
“The value of a supply of goods or services or both shall be the
transaction value, which is the price actually paid or payable for
the said supply of goods or services or both where the supplier
and the recipient of the supply are not related and the price is
the sole consideration for the supply.”
• In the instant case, the value of supply for the registered person
who scrapped the assets and gave it to the agent will be the
transaction value at which such agent sells the asset to an
unrelated person and price is the sole consideration. The value
of supply of the asset given to the clearing agent (pure agent)
shall be as per Rule 33 of the CGST Rules.
Q183. What will be the valuation in case of supply of second hand
goods ?
Ans. The value for the purpose of GST levy shall be transaction value.
However, as per Rule 32(5) of the CGST Rules, the value of supply
in case of person dealing in second-hand goods i.e. used goods as
such or after such minor processing which does not change the
nature of the goods, shall be the difference between the selling price
and the purchase price and where the value of such supply is
negative, it shall be ignored. Further, Notification No.8/2018-Central
Tax (Rate) dated 25.01.2018 [“NN 8/2018-CTR”] provides for
discharge of tax on margin for sale of used cars.
The GST law provides for the levy of tax on the value of supply to be
determined on the basis of profit margin involved in certain types of
transactions only as stated above.
Q184. Elaborate the concept of pure agent’s services under GST apart
from the scenario of export of pure agent services?
Ans. Rule 33 of the CGST Rules reads as under:-
“33. Value of supply of services in case of pure agent.-
Notwithstanding anything contained in the provisions of this

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Chapter, the expenditure or costs incurred by a supplier as a

pure agent of the recipient of supply shall be excluded from the
value of supply, if all the following conditions are satisfied,
namely, -
(i) the supplier acts as a pure agent of the recipient of the
supply, when he makes the payment to the third party on
authorisation by such recipient;
(ii) the payment made by the pure agent on behalf of the
recipient of supply has been separately indicated in the
invoice issued by the pure agent to the recipient of service;
and
(iii) the supplies procured by the pure agent from the third party
as a pure agent of the recipient of supply are in addition to
the services he supplies on his own account.
Explanation.- For the purposes of this rule, the expression “pure
agent” means a person who-
(a) enters into a contractual agreement with the recipient of
supply to act as his pure agent to incur expenditure or costs
in the course of supply of goods or services or both;
(b) neither intends to hold nor holds any title to the goods or
services or both so procured or supplied as pure agent of the
recipient of supply;
(c) does not use for his own interest such goods or services so
procured; and
(d) receives only the actual amount incurred to procure such
goods or services in addition to the amount received for
supply he provides on his own account.
Illustration. — Corporate services firm A is engaged to handle
the legal work pertaining to the incorporation of Company B.
Other than its service fees, A also recovers from B, registration
fee and approval fee for the name of the company paid to the
Registrar of Companies. The fees charged by the Registrar of
Companies for the registration and approval of the name are
compulsorily levied on B. A is merely acting as a pure agent in
the payment of those fees. Therefore, A’s recovery of such

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 Value of Supply

expenses is a disbursement and not part of the value of supply

made by A to B.”
Some of the examples of pure agency are:
(a) Ticket in railways is booked by a travel agent on behalf of the
customer and the charges for such ticket are recovered by the
agent along with the commission by showing them separately
(b) Customs duty, dock dues, transportation, port clearance
charges etc. are paid by the customs broker on behalf of the
importer and recovered along with his commission from the
importer
(c) Advertisement charges to the newspaper are paid by advertising
agency on behalf of the customer and recovered separately
along with commission
(d) In an ex-factory delivery contract, if the transportation charges
are paid by the supplier on behalf of the recipient and
recovered separately from the recipient along with the price of
the goods
To establish that the conditions of pure agent are getting satisfied, it
is recommended that there should be a written contract between the
supplier and the recipient. The clauses of the agreement should
clearly point to compliance with all the conditions as discussed
above with regard to pure agent. This will act as the most
reasonable defence if any questions are raised by the Department
later on. However, even if the contract is not in writing, it can be
established by other available evidence that the conditions of pure
agent are satisfied. However, any contract in writing may be
considered as more persuasive in nature.
Further, in order to claim any amount as a deduction in the form of a
pure agent, the dealer will have to demonstrate with substantial
evidence that the liability to incur the cost was on the recipient and
that the dealer has incurred such cost merely for convenience sake.
Further, the dealer has to ensure that the invoice/ bill of supply/
receipt have been received in the name of the recipient, who is the
ultimate beneficiary.

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Q185. Whether reimbursement of expenses constitutes supply under

GST? If yes, whether it will be treated as composite supply or
individual supply?
Ans. If the supplier of service in the course of rendering service has to
make certain payments on behalf of the service receiver, they are
known as reimbursements. Section 15 of the CGST Act, provides
that tax shall be levied on the transaction value of supply including
incidental expenses such as commission and packing, charged by
the supplier to the recipient of a supply and any amount charged for
anything done by the supplier in respect of the supply of goods or
services or both at the time of, or before delivery of goods or supply
of services [Section 15(2) (c)]. However, there is an exception to this
provision as given in Rule 33 of the CGST Rules. This rule states
that the expenditure or costs incurred by a supplier as a pure agent
of the recipient of supply shall be excluded from the value of supply,
subject to the following conditions –
• enters into a contractual agreement with the recipient of supply
to act as his pure agent to incur expenditure or costs in the
course of supply of goods or services or both;
• neither intends to hold nor holds any title to the goods or
services or both so procured or supplied as pure agent of the
recipient of supply;
• does not use for his own interest such goods or services so
procured; and
• receives only the actual amount incurred to procure such goods
or services in addition to the amount received for supply he
provides on his own account.
The important thing to note is that a pure agent does not use the
goods or services so procured for his own interest and this fact has
to be determined from the terms of the contract. Another important
fact is that, the person who provides any service as a pure agent
receives only the actual amount for the services provided.
If the above conditions are met, then reimbursements will not be
included in the value of supply and no GST will be applicable.

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 Value of Supply

If the above conditions are not met, then value of reimbursements

will be included in the value of supply and tax has to be charged on
the same. Reimbursements will be treated as a composite supply
and tax has to be levied at the rate applicable to the principal
supply.
Q186. Mr. X runs a general store and he himself bundles some goods
with different MRP. Whether value of those goods will be
summation of all the MRPs and treating it as a mixed supply he
should charge the highest rate of GST on transaction value?
Ans. Section 8 of the CGST Act, discusses the tax liability on composite
and mixed supplies. The section is extracted below:
“8. The tax liability on composite and mixed supplies
The tax liability on a composite or a mixed supply shall be
determined in the following manner, namely:—
(a) a composite supply comprising two or more supplies, one of
which is a principal supply, shall be treated as a supply of
such principal supply; and
(b) a mixed supply comprising two or more supplies shall be
treated as a supply of that particular supply which attracts
the highest rate of tax.”
Further as per Section 15(1) of the CGST Act, -
“The value of a supply of goods or services or both shall be the
transaction value, which is the price actually paid or payable for
the said supply of goods or services or both where the supplier
and the recipient of the supply are not related and the price is
the sole consideration for the supply.”
In the given case, Mr. X the storekeeper will have to pay GST on the
transaction value and the rate of tax shall be the highest rate of tax
amongst the goods supplied by him as a mixed supply.
Q187. Whether old items by scrap or used material dealer eligible to
exemption under GST as input credit is not available? If yes
whether taxable value will be whole sale price or margin on the
transaction?

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Practical FAQ’s under GST

Ans. NN10/2017-CTR exempts intra-State supplies of second hand goods

received by a registered person, dealing in buying and selling of
second hand goods and who pays the central tax on the value of
outward supply of such second hand goods as determined under
sub-rule (5) of rule 32 of the CGST Rules, from any unregistered
supplier, from the whole of the central tax levied under the CGST
Act. Similar exemptions are also there in the respective SGST Acts.
Rule 32(5) of the CGST Rules inter alia provides:
“(5) Where a taxable supply is provided by a person dealing in
buying and selling of second hand goods i.e., used goods as
such or after such minor processing which does not change the
nature of the goods and where no input tax credit has been
availed on the purchase of such goods, the value of supply shall
be the difference between the selling price and the purchase
price and where the value of such supply is negative, it shall be
ignored:
Provided that the purchase value of goods repossessed from a
defaulting borrower, who is not registered, for the purpose of
recovery of a loan or debt shall be deemed to be the purchase
price of such goods by the defaulting borrower reduced by five
percentage points for every quarter or part thereof, between the
date of purchase and the date of disposal by the person making
such repossession.”
Illustration: For instance, a company say M/s ABC Ltd, which deals
in buying and selling of used goods, purchases a used machine
(Original price ` 5 lakh) for ` 3 lakhs from an unregistered person
and sells the same after minor furbishing in July, 2017 for
` 3,50,000/-. The supply of the machine to the company for ` 3 lakh
shall be exempt and the supply of the same by the company to its
customer for ` 3.5 lakh shall be taxed and GST shall be levied.
The value for GST purpose shall be ` 50,000/-, i.e. the difference
between the selling and the purchase price for the company.
In case any other value is added by way of repair, refurbishing,
reconditioning etc., the same shall also be added to the value of
goods and be part of the margin.

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 Value of Supply

Q188. What will be the valuation in case of supply to related party if

the related party is registered and taking credit in the
manufacture of its final product?
Ans. Section 15 (1) of the CGST Act, inter alia stipulates: “The value of a
supply of goods or services or both shall be the transaction value,
which is the price actually paid or payable for the said supply of
goods or services or both where the supplier and the recipient of the
supply are not related and the price is the sole consideration for the
supply.”
Rule 28 of the CGST Rules, specifically deals with determining value
of supply between distinct or related persons as follows:
“RULE 28. Value of supply of goods or services or both
between distinct or related persons, other than through an
agent.
The value of the supply of goods or services or both between
distinct persons as specified in sub-section (4) and (5) of section 25
or where the supplier and recipient are related, other than where the
supply is made through an agent, shall -
(a) be the open market value of such supply;
(b) if the open market value is not available, be the value of supply
of goods or services of like kind and quality;
(c) if the value is not determinable under clause (a) or (b), be the
value as determined by the application of rule 30 or rule 31, in
that order :
Provided that where the goods are intended for further supply
as such by the recipient, the value shall, at the option of the
supplier, be an amount equivalent to ninety percent of the price
charged for the supply of goods of like kind and quality by the
recipient to his customer not being a related person:
Provided further that where the recipient is eligible for full input
tax credit, the value declared in the invoice shall be deemed to
be the open market value of the goods or services.”
Hence, if the supplier has not charged any value or the recipient
doesn’t avail ITC, and then the second proviso to rule 28 of the

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Practical FAQ’s under GST

CGST Rules won’t be applicable. Thus, it can be said, that if value is

charged, the same shall be considered and credit can be availed. In
case value is zero, the first proviso shall apply.
Q189. How to value the scrap generated in the manufacturing process,
if the same cannot be done at arms-length basis?
Ans. The price at which such scrap is disposed of by the manufacturing
unit, to an unrelated person, will be considered as the value of
supply, and if the same is not possible, the price at which like kind
and quality of goods sold to a recipient, would be the value of
supply.
Q190. As per one of the options given for valuation of stock transfer it
can be valued at 90% of the sale price, if the same is sold to an
unrelated buyer. However, in case of tea, the price is
determined by auction and the same is not known at the time of
stock transfer. How should the stock transfer be valued in this
case?
Ans. As per rule 28 of the CGST Rules, value of supply will be the open
market value of such goods and when the open market value is not
available, at the option of supplier, 90% of the price at which like
kind and quality of goods sold by the recipient as such to a unrelated
customer for money, will be value of supply. If the products are sold
as such by the recipient, at the time of supply the price at which
such goods are sold by the recipient will be accepted as the value of
supply.
Q191. State the legal premise of post supply discount under GST,
when such discount is not mentioned in GST invoice?
Ans. Section 15 (3) of the CGST Act, inter alia states:
“(3) The value of the supply shall not include any discount which is
given —
(a) before or at the time of the supply if such discount has been
duly recorded in the invoice issued in respect of such supply;
and
(b) after the supply has been effected, if —
(i) such discount is established in terms of an agreement

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 Value of Supply

entered into at or before the time of such supply and

specifically linked to relevant invoices; and
(ii) input tax credit as is attributable to the discount on the
basis of document issued by the supplier has been reversed
by the recipient of the supply.”
Discount after supply of goods or services, are those that are
allowed after supply through a credit note. Credit notes in the
context of GST have been discussed in detail under section 34
which may be referred to identify whether in all cases of discount,
credit notes are allowed to be issued. For such ‘off-bill’ discounts to
qualify as reduction from the transaction value, adherence to the
conditions specified in section 15(3) are enough. These conditions
are very explicit and simple in their application. This simplicity is not
to be equated with ease because these conditions specified are
such that can cause great unease and result in many transactions
where discount given after supply fail to satisfy these conditions. But
when the conditions are satisfied, discounts given after supply can
be reduced from the transaction value.
Quantity discounts are those that are aimed at reducing the price of
each supply on the condition that a certain quantity of stocks needs
to be exhausted within a specified duration of time. Here again,
inquiry is required into the terms and conditions applicable to this
quantity discount. Where the stock supplied by a manufacturer to a
dealer are at a specified ‘dealer price’, which is applied in respect of
supplies to all dealers along with additional discount linked to
conditions – quantity and time – that is contingent at the time of
supply by the manufacturer, this would be an eligible discount under
section 15(3).
Q192. Where a headphone is supplied free with mobile, what will be
the value of headphone? Whether such free supply is required
to be mentioned in the invoice or statement in brochures are
sufficient legal document to prove that the company is
providing headphone free of cost with mobile?
Ans. Section 15 (1) of the CGST Act, accepts the transaction value as
taxable value if the supplier and recipient are not related and price is
the sole consideration. Though the headphone is mentioned as free,

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the cost of it would already be built into the product price. Hence, if
these two conditions are satisfied, the value charged on the Invoice
shall be the value of supply.
Q193. If a manufacturing company supplies its product to local
villagers at subsidized rates then whether transaction value
shall be at that subsidized rate? If yes, can the company bill it
at market value and consider subsidy provided as Corporate
Social Responsibility (CSR) expense?
Ans. Section 15(1) of the CGST Act inter alia states that, “The value of a
supply of goods or services or both shall be the transaction value,
which is the price actually paid or payable for the said supply of
goods or services or both where the supplier and the recipient of the
supply are not related and the price is the sole consideration for the
supply.”
Hence, the transaction value will be at the subsidized rate for which
the local villagers pay the price. Hence, the company cannot bill the
goods at market value and consider subsidiary provided as CSR
expenses.
Q194. Whether taxable value of supply shall include cost of packing
for safe transportation at the request of the purchaser?
Ans. ‘Transaction value’ is the price actually paid or payable for supply of
goods and/or services. Incidental expenses, such as commission
and packing, charged by the supplier to the recipient of a supply,
including any amount charged for anything done by the supplier in
respect of the supply of goods and /or services at the time of, or
before delivery of the goods or, as the case may be, supply of the
services shall form a part of transaction value.
Hence Taxable value shall include the cost of packaging for safe
transportation at the request of the purchaser.
Q195. Whether subsidies provided by the Central Government and
State Government are to be excluded from the value of taxable
supply?
Ans. As per section 15(2) subsidy amount other than subsidy received
from Central & State Governments is to be included in the
transaction value.

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 Value of Supply

Subsidy if received from Central & State Government shall have to

be excluded from the value of taxable supply.
Q196. In case of "buy one get one" transaction what will be total value
of supply and tax to be applied. For example, two shirts of
` 2,000 each are sold in “buy one and take two offers” for
` 2,000. What will be the transaction value in this case.
Ans. Output tax is to be paid on sale price unless the billing or packaging
mechanism is changed. In the case of buy one get one free
transaction, consideration paid will be treated as value of supply. For
example two shirts of ` 2,000 each are sold in buy one and get one
offer for Rs 2,000. The transaction value in this case is ` 2000 only.
Q197. Whether discount given at the time of supply will be considered
for calculating value of supply under GST?
Ans. Discounts given before or at the time of supply will be allowed as
deduction from transaction value. This discount amount must be
clearly mentioned on the invoice.
Q198. What is the value of supply in respect of non-recovery of
payments or bad debts under GST?
Ans. The adjustment of GST already paid is allowed only by way of
issuance of credit/debit note in terms of section 34 of the CGST Act.
The proviso to section 34(2) provides that no reduction in liability
would be allowed if the incidence of tax has been passed on to
another person. If bad debts are on account of deficiency in supply
of services, or tax charged being greater than actual tax liability, or
goods returned, GST paid on the same is refundable subject to
fulfilment of the prescribed conditions. Therefore, GST already paid
on bad debts, as used in the trade parlance, cannot be adjusted. In
short, once an invoice is issued GST liability arises. Bad debt arises
only if the dues are not collected despite best efforts to recover it.
You have to write off both the basic value of the invoice and also
the tax portion.
Q199. A supplier company announces schemes for distribution of
their goods by distributor to retailers at a discounted price,
later on reimbursed by Supplier Company to distributor in the

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form of free goods. How valuation of such supply of goods by

distributor to retailer is determined?
Ans. Valuation of such supply of goods by distributor to retailer is
determined at discounted price only provided the conditions under
Section 15 (3) (a) or (b) are satisfied by the distributor.
Q200. A canteen sells food to public at a concession rate. For e.g. a
plate of idly costing ` 10/- is sold at ` 6/- and remaining ` 4/- is
reimbursed by the Government. Whether GST has to be charged
on sale price ` 6/- or the cost ` 10/-?
Ans. Section 15 (2) (e) of the CGST Act, states that subsidies shall form
part of taxable value but excludes subsidies received from Central
and State Governments. Hence in this case the subsidy of ` 4/-
need not be included in the taxable value for paying GST.GST, if
applicable is payable on ` 6/-.
Q201. In case of electronic goods, there is practice to sell goods by
manufacturer with some free goods to retailers. Further,
retailers sell the goods to consumers at a price arrived at by
them by applying average cost per unit to retailer. Thus, even
goods received free of cost from the manufacturer are sold by
the retailers at average price. Whether this practice of charging
consumer by retailer is followed, can the price be billed by
manufacturer to retailer?
Ans. The two transactions viz between the manufacturer and retailer and
retailer and final consumer are independent of each other and
pricing of either cannot influence or entail any liability on the other.
Even when the goods are sold at a lower price to the final consumer
and such goods are priced higher or lower by the manufacturer, the
price charged by the manufacturer cannot be questioned as in this
case section 15(4) of the CGST Act has no application as the
consideration is neither from a related party nor there is any
consideration received in kind by the manufacturer.
Q202. Whether we have to maintain the records i.e. sale and purchase
value, for each item for the purpose of margin on which tax has
to be calculated in case of resale of old vehicles? How
valuation will be done in that case?

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Ans. Yes, you have to maintain the records i.e. sale and purchase value,
for each item. The taxable value of supply of second-hand goods
i.e., used goods as such or after such minor processing which does
not change the nature of goods, shall be the difference between the
purchase price and the selling price, provided no ITC has been
availed on purchase of such goods. However, if the selling price is
less than the purchase price, that negative value will be ignored.
Persons who purchase second hand goods after payment of tax to
supplier of such goods will be governed by this valuation rule only
when they do not avail ITC on such input supply. If ITC is availed,
then such supply will be governed by normal GST valuation.

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 Chapter 7
Input Tax Credit
Q203. There is a Pvt. Ltd. Company which has built a building fully
furnished with furniture, interiors etc. and uses the property for
renting out. It has GST ITC on building construction, furniture,
electrical infrastructures including Genets, ACs etc. It has to
charge GST on rent. Will the purchases of capital goods be
considered in furtherance of business and be allowed to use
GST input credit against GST output on rent receivable from
tenants?
Ans. Yes, GST ITC on capital goods except immovable property will be
allowed against GST output on rent receivable.
ITC is allowed according to the Judgement of the Hon’ble High Court
of Orissa in the matter of Safari Retreats Private Limited Versus
Chief Commissioner of CGST [2019 (25) G.S.T.L. 341(Ori.)]. The
High Court has answered the question raised by the appellant but
has not specifically distinguished, (declared) section 17(5) (d) to be
ultra-virus to the CGST Act and hence it will be risky to avail the
credit of immovable property on the basis of the above Judgement.
Q204. In a case covered under Entry No, 1 of Schedule I the CGST Act,
(deemed supply) an asset on which ITC was taken in pre-GST
period is disposed without any consideration. Whether
Schedule I covers only post-GST purchased assets or even
pre-GST business assets.
Ans. Schedule I of the CGST Act, does not specifically provide for this,
but a harmonious reading of Entry No.1 of Schedule I of the CGST
Act, gives an understanding that it is also applicable for pre-GST
procured assets. The intention of the law is to either deny ITC on
business assets which are given free of cost or encourage payment
of tax on disposal of ITC availed assets which are given free of cost.
Q205. How much ITC can be claimed, if a machine is used for both
office and personal use?

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 Input Tax Credit

Ans. As per section 17 (1) of the CGST Act, where the goods or services
or both are used by the registered person partly for the purpose of
any business and partly for other purposes, the amount of credit
shall be restricted to so much of the input tax as is attributable to the
purposes of his business. Rule 43 of the CGST Rules, does not
specifically contain the methodology for reversal of ITC on capital
goods when it is common for office and personal use. The prevailing
Rule 43 provides only a reversal methodology when the output is
towards both taxable and exempted.
Notwithstanding, the lack of machinery provision, if the taxpayer
identifies that a capital goods has been used for both business and
non-business purpose, then the same shall be reversed on any
established reasonable basis.
Q206. A Production House prints media photographs and charges
GST @ 18%. Can it claim input credit available for purchase of
food and fees paid for hair stylist?
Ans. As per section 17(5) of the CGST Act, ITC on food and beverages
supplied are blocked credit for registered persons except when it is
either further supplied or supplied as part of mixed or composite
supply. Thus, the Production House cannot avail ITC on food.
However, a fee paid to hair stylist is not for personal consumption
and is in furtherance of business and thus ITC on the same could be
availed.
Q207. Suppose office furniture and computers are purchased and ITC
is claimed. After 4 years if these assets are condemned and
disposed without consideration. What will be the ITC provision
applicable in this case?
Ans. As per section 18(6) of the CGST Act, in case of supply of capital
goods, with or without consideration, on which ITC has been taken,
the registered person shall pay an amount equal to the ITC taken on
the said capital goods or plant & machinery reduced by the
percentage points as may be prescribed or the tax on the
transaction value on such capital goods or plant & machinery
determined under section 15 of the CGST Act whichever is higher.
In this case capital goods are disposed off without consideration,
and hence, the registered person shall pay an amount equal to the

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ITC taken on the said capital goods or plant & machinery reduced by
the percentage points, prescribed as 5% per quarter or part of a
quarter from the date of the issue of the invoice for such goods (as
per rule 40 (2) of the CGST Rules).
Q208. Mr. X a registered person purchased a truck and he is engaged
in trading of sand.
Mr. X is not able to charge freight separately in invoice, but rate
of sand includes transportation charges.
(A) If the freight is charged separately in invoice, what will be
the value of taxable supply?
(B) Whether ITC can be claimed on purchase of truck and
replacement of tyre?
Ans. (A) All ITC credits are available in GST, if conditions stipulated in
section 16 of the CGST Act are satisfied by a registered person.
Non-availability of ITC is mentioned in section 17 of the CGST
Act. In the instant case, the truck is considered as motor vehicle
and section 17(5) (a) of the CGST Act deals with credit on motor
vehicle as under:
“(5) Notwithstanding anything contained in sub-section (1) of
section 16 and sub-section (1) of section 18, input tax credit
shall not be available in respect of the following, namely :—
(a) motor vehicles for transportation of persons having
approved seating capacity of not more than thirteen
persons (including the driver), except when they are used
for making the following taxable supplies, namely :—
(A) further supply of such motor vehicles; or
(B) transportation of passengers; or
(C) imparting training on driving such motor vehicles;”
The section is applicable in cases where motor vehicle is used
for transportation of persons. In the instant case, the motor
vehicle is used for transportation of goods and not for
transportation of person. Thus, it means that credit is available,
subject to satisfaction of section 16 of the CGST Act.

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 Input Tax Credit

(B) For determining the transaction value of supply, we need to

refer to section 15 of the CGST Act. If the contract with recipient
is such that the price charged is inclusive of freight, then price
charged is transaction value only and GST will be charged on
the said amount. Rate applicable on sand will be the applicable
tax rate.
(C) With reference to the rate to be charged on two types of
supplies, the point relevant for consideration here is that there
are two supplies one of goods and other of services. Supply of
transportation service and supply of sand for which separate
amount is mentioned in Tax invoice. Hence, we have to decide
whether the supply is a composite supply or mixed supply. As
per section 8 of the CGST Act, for the purposes of tax liability
composite supply shall be treated as a supply of principal supply
and the mixed supply is to be treated as supply of that particular
supply which attracts the highest rate of tax. Hence the
definitions of composite supply and mixed supply and as well as
the rate at which these two supplies are charged assume
importance.
Sand is charged at the rate of 5% (2.5% CGST+ 2.5% SGST)
As per NN 12/2017-CTR, the instant case is covered under
transportation service and is exigible to “NIL” rate as the said
service is not covered under GTA and courier agency:

Sl. Chapter, Description of Rate Condition

No. Section, Services (per
Heading, cent)
Group or
Service Code
(Tariff)
(1) (2) (3) (4) (5)
18 Heading 9965 Services by way of NIL NIL
transportation of
goods-
(a) by road except
the services of—

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Practical FAQ’s under GST

(i) a goods
transportation
agency;
(ii) a courier
agency;
(b) by inland
waterways.

In order to determine the correct rate of tax, we would first have

to determine whether the supply is a mixed supply or composite
supply
Section 2(74) of the CGST Act, defines “mixed supply” means
two or more individual supplies of goods or services, or any
combination thereof, made in conjunction with each other by a
taxable person for a single price where such supply does not
constitute a composite supply.
Section 2(30) of the CGST Act, defines composite supply”
means a supply made by a taxable person to a recipient
consisting of two or more taxable supplies of goods or services
or both, or any combination thereof, which are naturally bundled
and supplied in conjunction with each other in the ordinary
course of business, one of which is a principal supply.
In order to consider a service as a composite supply
following conditions need to be satisfied:
(I) All the Supply should be taxable supply:
As per Section 2(108); “taxable supply” means a supply of
goods or services or both which is leviable to tax under this
Act;
In the instant case, the transportation of goods by road is a
supply primarily leviable to tax under CGST Act at NIL rate
due to NN 12/2017-CTR. Hence it is a taxable supply.
Hence, one of the conditions to constitute the transaction as
a composite supply is satisfied.

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 Input Tax Credit

(II) Supply should be naturally bundled

The term naturally bundled has not been defined in the Act.
However, the following criteria can be adopted.
1. If buyers mostly expect such services to be provided as
a package, then the package will be treated as naturally
bundled.
2. If most of the service providers in the industry provide a
package of services, then it can be considered as
naturally bundled.
3. The nature of the various services in a bundle of
services will also help to identify whether the services
are bundled. If there is a main service and the others
are ancillary services then it becomes a bundled
service.
On evaluation of the above criteria we can safely conclude
that it is a bundled service and therefore, it is a case of
composite supply.
(III) Principal supply
As per Section 2 90) of the CGST Act, “principal supply”
means the supply of goods or services which constitutes
the predominant element of a composite supply and to
which any other supply forming part of that composite
supply is ancillary.
Again, another question arises as to what is the
predominant supply. The term predominant supply has not
been defined. Here the criteria will be what the recipient
wants to buy and what the supplier wants to sell. Applying
this criterion, the intention of both the supplier and buyer is
to sell / buy sand only. Hence the predominant supply is
sand. The rate of tax applicable for the whole composite
supply is the rate applicable to sand.
(D) ITC can be claimed on purchase of truck and replacement of
tyre
As per Section 17(5) (ab) of the CGST Act, services of general
insurance, servicing, repair and maintenance in so far as they

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relate to motor vehicles, vessels or aircraft referred to in clause

(a) or clause (aa) of section 17(5) of the CGST Act are blocked
and as such not allowed for taking the credit. However,
purchase of truck does not come under clause (a) or clause (aa)
and hence the ITC credit on the same will be allowed, subject to
satisfaction of section 17 of the CGST Act.
Q209. Can we reverse credit taken, if the vendor has raised bill on us
but the payment has not been made to the vendor within
180 days?
Ans. Yes, the second proviso to section 16(2), of the CSST Act, provides
for reversal and the third proviso allows re-availment of ITC on
account of non-payment once paid.
Q210. Whether GST is chargeable on the creditor balances written-off
pertaining to Pre-GST era?
Ans. As per second proviso to section 16 (2) of the CGST Act, where a
recipient fails to pay to the supplier of goods or services or both,
other than the supplies on which tax is payable on reverse charge
basis, the amount towards the value of supply along with tax
payable thereon within a period of 180 days from the date of issue of
invoice by the supplier, an amount equal to the ITC availed by the
recipient shall be added to his output tax liability, along with interest
thereon [From the recipient’s view].
Later, when the payment is made, the recipient can take the ITC
“Write off the creditor balance” means non-payment of dues; ITC
has to be reversed & added back to the output tax liability.
Where goods are received before the GST regime, the same credit
will be taken and claimed in Form GST TRAN-1 as per the
transitional provisions if not utilised in the previous regime.
However, the base amount that is added to the income for non-
payment shall not be treated as supply and hence, no GST shall be
attracted.
GST will be charged and to be added back to the output tax liability
for the ITC taken on such supply.

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Q211. When can the tax paid under RCM be claimed as credit? Can it
be claimed in the same month when RCM is reported or in the
month when actual payment is made?
Ans. The credit of tax paid under RCM can be taken in accordance with
section 16 of the CGST Act, subject to section 17 thereof. The credit
can be taken when the invoice is raised as per section 31(3) (f) of
the CGST Act. Obligation to make payment of tax under RCM is
casted on the recipient.
Q212. If the output supply is not taxable or exempted from the levy of
GST, whether the RCM paid can be claimed as refund? Health
care services and diagnostic services are exempt from the levy
of GST. Whether tax paid under RCM and claimed as ITC in
respect of every inward supply can be adjusted against any
output service other than medical services?
Ans. ITC in respect of inward supplies covered under RCM can be availed
subject to the provisions of section 16 and section 17 of the CGST
Act in general and section 17(5) of the said Act in particular.
For taxable persons, having both exempt and taxable outward
supplies, ITC to the extent used for taxable output supplies only can
be claimed under section 17(2) / 17(3) of the CGST Act read with
rule 42/ 43 of the CGST Rules.
Hence, the common ITC and specific identifiable ITC attributable to
the rendering of any exempted supply had to be reversed and
cannot be used for any taxable outward supply liability.
Q213. Can a tour operator whose output tax is charged @5% set off
the same against the GST paid on foreign payments on reverse
charge @ 18%?
Ans. Section 9 (3) of the CGST/SGST Act and section 5 (3) of the IGST
Act deal with RCM ITC of RCM is available on payment basis.
Based on the payment of taxes under RCM and self-invoicing
thereof the taxpayers duly comply with the conditions of admissibility
of ITC as mentioned under section 16(2) of the CGST Act and
accordingly the taxpayers could claim the ITC of such tax paid under
RCM. Hence, a tour operator can set off his GST liability against
RCM paid in cash.

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Q214. Whether TCS by e-commerce operator can be adjusted against

GST payable by a supplier making supply through that
e-commerce operator?
Ans. Yes, TCS by e-commerce operator will be reflected in the cash
ledger of the supplier on filing of TCS return. On filling of Form
GSTR-8 return by e-commerce operator, data will be auto populated
and supplier on confirming the same and accepting it will have the
TCS amount reflected in cash ledger. This amount can be adjusted
against GST payable or can be claimed as refund on filing of
respective application.
Q215. A registered person has paid GST under RCM for 12 months
April to March. It is found during the month of March (end of the
financial year) that ITC of this RCM has not been taken. Advice
whether the entire RCM paid since April can be claimed as
credit?
Ans. As per section 16(4) of the CGST Act, “A registered person shall not
be entitled to take input tax credit in respect of any invoice or debit
note for supply of goods or services or both after the due date of
furnishing of the return under section 39 for the month of September
following the end of financial year to which such invoice or invoice
relating to such debit note pertains or furnishing of the relevant
annual return, whichever is earlier.”
In other words, it can be said that the overall time limit for availing
ITC under GST is the due date of the return for the month of
September of next financial year or annual return filing date for
relevant financial year whichever is earlier.
Hence the taxpayer, who has not availed the eligible ITC on RCM
supplies of any of the previous months, may avail such ITC in any of
the subsequent months, but within the time limit mentioned above.
Q216. RCM under section 9(4) of the CGST Act in respect of inward
supply from unregistered person to registered person is
applicable and was payable till 13.10.2017. Output supply is
partly taxable and partly exempt. RCM set-off is available
towards taxable supply. Whether RCM ITC relating to inward
supply can be used for making any exempt supply?

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Ans. ITC in respect of inward supplies covered under RCM can be availed
subject to the provisions of sections 16 and section 17 of the CGST
Act, in general and section 17(5) thereof in particular.
For taxable persons, having both exempt and taxable outward
supplies, ITC to the extent used for taxable supplies can be claimed
under section 17(2) and 17(3) of the CGST Act read with rules 42
and 43 of the CGST Rules.
ITC claimed in respect of inward supplies including input credit
relating to RCM, which is exclusively used for effecting exempt
supplies, may have to be reversed. ITC attributable to outward
exempt supply is to be reversed at the invoice level and if such ITC
is a common credit the ITC reversal has to be based on the formula
prescribed in rules 42 and 43 of the CGST Rules, in respect of
inputs, input services and capital goods.
Q217. Furniture is sold by a company. It forms part of fixed asset
register. No ITC taken as it was not allowed at the time of VAT.
GST allows taking ITC on furniture. Whether GST applicable on
sale of such furniture?
Ans. Disposal of goods for a consideration is a supply attracting GST
levy. If ITC has not been availed on such assets which are being
sold, then the provisions of section 18(6) of the CGST Act shall not
apply. But it is still taxable at the appropriate rates against the
corresponding HSN code.
Q218. Whether ITC is admissible on lift and escalator installed in
office? Whether your answer will be different, if such office
premises is let out?
Ans. ITC can be taken for all goods or services or both, if conditions of
section 16 of the CGST Act are satisfied, subject to restrictions
under section 17 thereof. On literal interpretation of section 17(5) (c)
and (d), lift and escalator if installed in office will not be eligible for
ITC. The provision inter alia states:
“Notwithstanding anything contained in sub-section (1) of section
16 and sub-section (1) of section 18, input tax credit shall not be
available in respect of the following, namely :—.
(a) ………….

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(b) works contract services when supplied for construction of an

immovable property (other than plant and machinery) except
where it is an input service for further supply of works contract
service;
(c) goods or services or both received by a taxable person for
construction of an immovable property (other than plant or
machinery) on his own account including when such goods or
services or both are used in the course or furtherance of
business.
Explanation. — For the purposes of clauses (c) and (d), the
expression “construction” includes re-construction, renovation,
additions or alterations or repairs, to the extent of capitalisation, to
the said immovable property”
Further, we would also like to refer to the decision of the of Hon’ble
High Court of Orissa in the matter of M/s Safari Retreats Private
Limited and Another Versus Chief Commissioner of Central
Goods & Service Tax & Others [2019 (5) TMI 1278]., where Court
has read down the provision and allowed ITC on taxes paid on
various goods and services used in the construction of immovable
property, when the said immovable property is let out. However, the
Department has preferred an appeal before the Supreme Court.
Q219. In GST regime, whether ITC on services availed for providing
water service, by water vending machines installed in public
places is available?
Ans. If the eligibility conditions prescribed under section 16 of the CGST
Act are fulfilled and not blocked under section 17 thereof, any input
service related credit can be availed, if it is in the course or
furtherance of business. In the case of water vending machines, if
the service expense are in the course or furtherance of business,
ITC can be availed, else not.
Q220. A Ltd provides both exempted and taxable supplies. How is ITC
available? Is it in the ratio of exempt and taxable?
Ans. Section 17(2) of the CGST Act, provides that where the goods or
services are used partly for effecting taxable supplies (including zero
rated) and partly for exempt/ non-business use then the amount of

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credit as attributable to exempt supplies or non- business use shall

be reversed as per rule 42/43 of the CGST Rules.
Q221. Can IGST credit of one State be adjusted against IGST liability
of another State?
Ans. IGST ITC can be availed by a person only if such person is
registered. Registration is connected to the State and any ITC
availed in that State can be utilised only in that State irrespective of
whether it is CGST, SGST, UTGST or IGST. Hence IGST credit of
one State cannot be adjusted against IGST liability of any other
State or Union Territory.
Q222. M/s X Ltd purchases raw material from M/s Z Ltd and supplies
goods to M/s Z Ltd. While paying the accounting dues M/s Z
Ltd. pays to M/s X Ltd. net off the receivable and payable.
However for discharging the GST liability it is properly
collecting tax and paying the same in the appropriate State.
Whether M/s Z Ltd. can claim full ITC, even though the netting
off is done?
Ans. Second proviso to section 16(2) of the CGST Act, only provides that
ITC reversal shall apply in cases of non-payment. It does not
prescribe any particular mode of payment. Hence, even if payment
is made by book entries within 180 days, it shall constitute payment
and hence ITC reversal is not warranted. One can also refer to
Board Circular No. 122/3/2010‐ST dated 30.04.2010 issued in the
context of reversal under the CCR 2004 wherein the said
interpretation has been accepted.
Q223. Suppose a company registered in Delhi takes a package from a
tour operator located in Delhi for a hotel in Mumbai. Can ITC
charged by tour operator be claimed by the company?
Ans. Both the tour operator and the company are situated in Delhi and
hence the company is eligible to avail the ITC charged by the tour
operator subject to the provisions pertaining to ITC contained in
Chapter V of the CGST Act, being satisfied by the company.
Q224. M/s X Ltd., a local courier company is providing services to
M/s Y Ltd, registered in India, for international movement of
goods. What will be the place of supply and whether ITC can be
claimed by M/s Y Ltd.?

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Ans. As per section 12(8)(a) of the IGST Act, where location of supplier
and recipient are in India and recipient is registered, the place of
supply of services by way of transportation of goods through courier
will be the location of the registered person. Thus, if the supplier and
receiver are in the same State then CGST and SGST will be levied.
M/s Y Ltd can claim ITC as it is for the business, provided there is
no bar by section 17 of the CGST Act.
Q225. X, a registered person in Mumbai, visited Haryana and stayed in
XYZ Hotel. XYZ Hotel charged CGST and SGST. Whether, X can
claim ITC while discharging the SGST and CGST Liability in
Maharashtra?
Ans. From a reading of section 49(5) of the CGST Act, it is clear that the
Goods and Services Tax is State and registration specific, and
therefore ITC of one State cannot be utilised for payment of liability
of another State. Hence, SGST and CGST input of Haryana State
cannot be set off against SGST and CGST payable in Maharashtra.
Q226. In the case of construction contract, if the service recipient is in
Gujarat and service provider is in Maharashtra providing his
services for the construction site in Maharashtra, the service
provider will raise CGST and SGST invoice, which means the
service recipient, cannot claim ITC of such services. Explain.
Ans. GST is a destination-based tax, i.e., the goods/services will be taxed
at the place where they are consumed and not at the place of their
origin. From a reading of section 49(5) of the CGST Act, it is clear
that the Goods and Services Tax is State and registration specific,
and therefore ITC of one State cannot utilised for payment of liability
of another State.
Q227. In the case of rent a cab services a person is opting for full GST
@12%. Can GST paid on purchase of new vehicle @ 28% be
claimed as ITC?
Ans. According to section 17(5) (a) of the CGST Act, ITC shall not be
allowed in the case of motor vehicles for transportation of persons
having approved seating capacity of not more than 13 persons
(including the driver), except when they are used for making the
following taxable supplies namely: -

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A) further supply of such motor vehicles or

B) transportation of passengers or
C) imparting training on driving such motor vehicles.
Hence ITC is available to the taxable person who is in the business
of rent a cab service.
Q228. Whether ITC is eligible on prefabricated steel structure (easily
movable in nature) for erection of warehouse?
Ans. According to section 17(5) (c) of the CGST Act, ITC is not allowed in
respect of “works contract services when supplied for construction of
an immovable property (other than plant and machinery) except
where it is an input service for further supply of works contract
service;”
Further as per section 17(5) (d), ITC is not allowed, where “goods or
services or both received by a taxable person for construction of an
immovable property (other than plant or machinery) on his own
account including when such goods or services or both are used in
the course or furtherance of business.”
Warehouse constructed using pre-fabricated structure is immovable
property and ITC of inputs used in such construction is not
admissible.
Q229. Mr. X has started a business of a gaming center and provides
the following services:
(a) Sports facility like cricket, golf (not computer games)
(b) Restaurant
(c) Bar
Mr. X has incurred capital expenditure and paid GST there on,
which is available in credit ledger. In this month, they have
revenue only from sale of food. He has collected GST on such
sale of food @ 5%. He has not availed input on purchase of
food items. However, there are other inward supplies like
internet, advertisement and other common services which are
used for both sale of food and other services. Please explain.

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1. Treatment of such common inputs; whether to reverse the

amount of ITC from such common inputs proportionate to
the revenue from sale of food (under rule 42 of the CGST
Rules)
2. Can ITC on such inputs and inputs on capital expenditure
be utilized for payment of GST on sale of food?
Ans. 1. ITC shall be reversed as per rule 42/43 of the CGST Rules.
2. Vide Notification No. 46/2017- Central Tax (Rate) dated
15.11.2017, the GST rate applicable to services provided by
restaurants, eating joint including mess, canteens etc. was
reduced to 5% subject to a condition that input tax charged on
goods and services used in supplying the service has not been
taken. With respect to inputs which are used for making
restaurant, etc., supplies @5%, reversal is required to be
done in terms of rule 42 of the CGST Rules. In terms of
explanation (iv)(b) in Para 4 to NN 11/2017-CTR ibid, where a
rate has been prescribed in the notification subject to the
condition that ITC on goods or services used for supplying such
services has not been taken, it shall mean that-
a. ITC on goods or services used exclusively in providing such
service has not been taken.
b. ITC on goods or services used partly for providing such
services and other services eligible for credit shall be
reversed as if supply of such service is an exempt supply
attracting the provisions of section 17(2) of the Act.
Section 17(2) of the CGST Act, requires reversal of ITC in terms
of rule 42/43 of the CGST Rules when goods/services are used
commonly for effecting both taxable and exempt supplies.
Thereby, it can be said that the change in rate of tax w.r.t.
restaurant service falls under the purview of section 18(4) of the
CGST Act and reversal of ITC is required which shall be done in
terms of section 17(2) of CGST Act read with rule 43 of the
CGST Rules. From the above explanation in the notification
read with section 17(2), it can be said that in case of restaurant
service being taxed @ 5% from 15.11.2017, ITC of inputs held
in stock, WIP and finished goods, needs to be reversed/paid as

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per rule 42 of the CGST Rules. Further, ITC on capital goods

also needs to be reversed / paid as per rule 43 of the CGST
Rules.
3. ITC credit lying in the credit ledger can’t be utilised for the
liability arising from the sale of food.
Q230. Can a hotel claim input tax credit on repair of building. Will
there be a different view if, the repair is substantial. Examine in
the light of section 17(5) and the High Court judgements?
Ans. According to section 17(5) (d) of the CGST Act, goods or services or
both received by the taxable person for construction of an
immovable property (other than P&M) on his own account including
when such goods or services or both are used in the course of
furtherance of business, ITC is not allowed. For this purpose, the
expression "construction" includes re-construction, renovation,
additions or repairs, to the extent of capitalization, to the said
immovable property. Thus, if expenses of renovation, repairs,
re-construction or alterations are not capitalised in the books of
accounts of taxable person, ITC is allowable.
The High Court judgement is relevant for that State and that
judgement not being stayed by the Supreme Court, Hence, placing
reliance on High Court judgments, the Auditor shall have to evaluate
the risk in certifying Form GSTR-9C from legal angle.
Q231. The setting up of a badminton academy involves construction
for the playing zone civil work, iron purchase, flooring etc. Can
ITC be taken on this capital expenditure?
Ans. We have discussed supra in Q No. 218 regarding ITC for lift and
escalator. The issue and law have been well covered therein.
However, here we need to decide upon the question whether the set
up cost incurred for badminton court is a plant and machinery for a
registered person. If it is only then ITC is available.
Generally speaking, plant and machinery is an asset that is used by
a business for the purpose of carrying on the business and is not
either stock in trade or the business premises or part of the business
premises. The difference between plant and machinery is that
generally machinery will have moving working parts, and plant will
not.

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Oxford dictionary defines "plant and machinery" as “The equipment

required to operate a business.”
Considering the above point, we can say that if badminton need to
be played, court and its maintenance will be required, without which
the supply cannot be provided. We can therefore consider the
badminton court as plant and can claim ITC on the same.
Q232. Is ITC available for staff bus input services?
Ans. According to section 17(5) (a) of CGST Act, ITC shall not be allowed
in case of motor vehicles for transportation of persons having
approved seating capacity of not more than 13 persons (including
driver), except when they are used for making the following taxable
supplies namely: - (a) further supply of such motor vehicles or (b)
transportation of passengers or (c) imparting training on driving such
motor vehicles. However, proviso to section 17(5) (b) of the CGST
Act, stipulates : “Provided that the input tax credit in respect of such
goods or services or both shall be available, where it is obligatory for
an employer to provide the same to its employees under any law for
the time being in force”. Hence, ITC can be claimed by the employer
if it is as per any law for the time being in force.
ITC on services of renting, leasing or hiring is available only in case
of bus or any motor vehicle having approved seating capacity of
more than 13 persons (including driver) as per section 17 (5) (b) (i)
of the CGST Act.
Q233. Is ITC available only if invoice is complete in all respects?
Ans. The proviso to rule 36(2) of CGST Rules, inserted w.e.f. 04-9-2018
reads as under:
“36. Documentary requirements and conditions for claiming
input tax credit.
………………
(2) ………………
Provided that if the said document does not contain all the
specified particulars but contains the details of the amount of tax
charged, description of goods or services, total value of supply of

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goods or services or both, GSTIN of the supplier and recipient

and place of supply in case of inter-State supply, input tax credit
may be availed by such registered person”
In accordance with the above Rules, ITC is available if the invoice,
contains the details of the amount of tax charged, description of
goods or services, total value of supply of goods or services or both,
GSTIN of the supplier and recipient and place of supply in case of
inter-State supply. Hence, ITC is available even though HSN is not
mentioned in the invoice.
Q234. Explain ITC provisions with regard to goods supplied on free of
cost basis?
Ans. Section 17(5) (h) of the CGST Act specifically imposes the
restriction on availment of credit with respect to goods disposed of
by way of ‘gift’ or ‘free samples’. The goods or services or both
which are supplied free of cost (without any consideration) shall not
be treated as 'supply' under the CGST Act, except where the activity
falls within the ambit of Schedule I of the said Act.
Q235. In the light of the ineligibility of ITC on motor vehicle as per
amendment w.e.f.1st Feb 2019, will ITC be available on any
motor vehicle purchased or leased prior to that date? Are
expenses like repairs, insurance etc. allowed both prior and
post the amendment?
Ans. One has to grasp the provisions of section 17(5) of the CGST Act,
before amendment and after amendment made by the CGST
(Amendment) Act, 2018 read with Notification No. 2/2019-Central
Tax, dated 29.1.2019("NN 2/2019-CT"), with effect from 01.02.2019.
Section 17(5) of the CGST Act - Notwithstanding anything contained
in sub-section (1) of section 16 and sub-section (1) of section 18,ITC
shall not be available in respect of the following, namely:—

Before 01.02.2019 From 01.02.2019

(a) motor vehicles and other (a) motor vehicles for
conveyances except when transportation of persons
they are used– having approved seating
(i) for making the following capacity of not more than

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taxable supplies, thirteen persons

namely:— (including the driver),
(A) further supply of except when they are used
such vehicles or for making the following
conveyances ; or taxable supplies, namely:—
(B) transportation of (A) further supply of such
passengers; or motor vehicles; or
(C) imparting training (B) transportation of
on driving, flying, passengers; or
navigating such (C) imparting training on
vehicles or driving such motor
conveyances; vehicles;
(ii) for transportation of (aa) vessels and aircraft
goods; except when they are
used—
(i) for making the
following taxable
supplies, namely :—
(A) further supply of
such vessels or
aircraft; or
(B) transportation of
passengers; or
(C) imparting training
on navigating such
vessels; or
(D) imparting training
on flying such
aircraft;
(ii) for transportation of
goods;
(ab) services of general
insurance, servicing,
repair and maintenance in
so far as they relate to
motor vehicles, vessels or

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 Input Tax Credit

aircraft referred to in
clause (a) or clause (aa) :
Provided that the input tax
credit in respect of such
services shall be
available—
(i) where the motor
vehicles, vessels or
aircraft referred to in
clause (a) or clause
(aa) are used for the
purposes specified
therein;
(ii) where received by a
taxable person
engaged —
(I) in the manufacture
of such motor
vehicles, vessels
or aircraft; or
(II) in the supply of
general insurance
services in respect
of such motor
vehicles, vessels
or aircraft insured
by him;
If we analyse section 17(5) of the CGST Act, as it stood before
01.02.2019, it could be seen that the starting paragraph of section
17(5) states that ITC shall not be available in respect of the following
and lists out the ineligible ITC. The word “in respect of” led to
interpretational issue and the interpretation was that ITC is not
available only in respect of motor vehicle and not on incidental
expenses incurred in relation to motor vehicles. Now the amended
section 17(5) (ab) of the CGST Act expressly denies credit for
services of general insurance, servicing, repairs and maintenance in

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so far as it relates to motor vehicles. The amendment is not

retrospective. Hence it is clear that ITC in respect of the above-
mentioned services was available upto 31.01.2019 and not available
from 01.02.2019.
Regarding eligibility of ITC in respect of motor vehicles the
provisions upto 31.01.2019 and from 01.02.2019 are the same
except the following:
From 01/02/2019: In respect of motor vehicles used for
transportation of persons having approved seating capacity of not
more than thirteen persons (including driver) ITC is available only
when it is used for further taxable supply of motor vehicles or further
taxable supply of service of transportation of passengers or service
of imparting training on driving such motor vehicles. The ITC in
respect of motor vehicles used for transportation of persons having
seating capacity of more than 13 persons (including driver) is
available without restriction of its usage. However, upto 31.01.2019
this restriction was in force irrespective of the seating capacity. For
e.g. if a registered person is using a bus having seating capacity of
more than thirteen persons (including the driver) and is used for
transportation of its employees ITC is available from 01/02/2019.
The same was not available upto 31.01.2019. Note the word
‘persons’ which has been used in the amended section from
01.02.2019. The word passenger has not been used in that place.
Transportation of employee will be covered by the term ‘person’ and
not if the term used was passenger.
Q236. As per invoice we have CGST/SGST input but we have claimed
IGST in the return. This pertains to FY 2018-19. What should be
done? Can we adjust IGST with CGST/SGST?
Ans. As per section 16 of the CGST Act, credit can be taken for
respective type of tax being levied. Now if by mistake IGST credit is
taken in place of CGST and SGST, one should take following action:
(i) IGST credit needs to be reversed back by filing Form DRC-03
and also pay interest on the same.
(ii) CGST and SGST input credit could have been taken till filing of
Form GSTR-3B of September month due date of respective

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State or Union Territory after the end of the financial year. If

credit is taken, then same also needs to be reported in Table 13
of Form GSTR-9 and if credit is not taken, then section 16(4) of
the CGST Act, will disentitle you from taking the credit and
same will lapse.
Q237. A registered person is having Head Office (HO) in Delhi and two
manufacturing plants in Punjab and Uttarakand. Please explain
the procedure by which the ITC available to Head Office can be
availed by manufacturing plants.
Ans. If a registered person is having Head Office in Delhi and
manufacturing plants in Punjab and Uttarakand, then the best way
for transferring the credit is to take the Input Service Distribution
(ISD) registration and transfer the credit in accordance with ISD
procedure. Alternatively, many experts also believe that an invoice
can be raised with respect to branch for services rendered to them
by the Head Office.
Q238. A building is damaged due to fire and expenses in the nature of
capital & revenue are incurred. How to claim credit on such
expenses?
Ans. The answer to this question should be in the light of discussion
made earlier in the answer to question no. 218 in the matter of ITC
eligible on lift and escalator. Here we have identified that
expenditure incurred on immovable property, which attracts the
provisions of section 17(5) (c) and (d) as self-expenditure. ITC which
is incurred and later capitalized in the books of account will be
disallowed. However, ITC in respect of revenue expenditure which is
charged to profit and loss account will be allowed.
Q239. Whether ITC is available for RCM paid on freight on exempt
supply of goods?
Ans. Normally, ITC on the tax that is paid under RCM will be available
only after making payment. In this case, the freight is being paid on
the goods supplied that are exempt. Hence, ITC will be subject to
reversal as required in section 17(2) of the CGST Act read with
rule 42 of the CGST Rules. The tax paid under RCM on freight will
not be eligible for credit as it is directly attributable to effecting
exempting supplies.

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Practical FAQ’s under GST

Q240. In the case of educational institution, where there is no output

tax liability, what will be the procedure to get ITC on various
taxable supplies received by it as this increases various costs
for the institution?
Ans. ITC is available to all registered persons as per section 16 of the
CGST Act, subject to the restrictions placed under section 17.
Section 17(2) of the CGST Act debars us by taking only
proportionate credit which relates to taxable supply. An educational
institution should first take the credit as per section 16 of the CGST
Act and later need to reverse the same as per section 17(2) thereof
for exempt services. One needs to refer Rule 42 of the CGST Rules
which provides the manner of determination of ITC in respect of
inputs or input services and reversal thereof.
Q241. What is the provision for claiming ITC, on insurance premium
paid along with GST by a proprietary professional concern
[where the proprietor himself is rendering the service as a
professional]?
Ans. It is assumed that the question pertains to health and medical
premium of proprietor, where proprietor himself is a professional.
Section 17(5)(b) restricts the ITC in respect of supply of health
services, life insurance services etc., subject to two exceptions
(i) where health services are used for making an outward taxable
supply of the same category of services. (ii) The expenditure does
not fall under the exceptions and hence ITC is ineligible. Further
section 17(5) (g) denies ITC in respect of goods or services or both
used for personal consumption. The Department can take a stand
that these services are for personal consumption and may disallow
the claim of ITC.
Q242. A manufacturer is importing goods and paying customs duty
including IGST and has availed ITC. But the same is not
reflected in Form GSTR 2A. How to apply Rule 36(4) for the
same?
Ans. The amount paid as IGST at Customs will not be reflected in Form
GSTR-2A. It will be at https://www.icegate.gov.in/ . You can visit the
website and verify the same. Also, credit is to be taken on the basis
of challan which is paid at Customs Port. To take the credit, the

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 Input Tax Credit

important document is the challan through which duty is paid at

Customs port. If everything is rightly mentioned the same will also
be reflected at ICEGATE portal too.
Rule 36(4) is not applicable to IGST paid at Customs port for any
Import of goods.
Q243. Please throw some light on the amendments to Rule 43 relating
to reversal of ITC in case of capital goods along with examples
comparing old and new rule.
Ans. Rule 43 of the CGST Rules has been subjected to several
amendments since 2017 to till date. For easy understanding we can
divide rule 43 between Reversals for use of exempt service in case
of construction contracts applicable to builders and in other cases.
We will discuss here the case which is applicable to general tax
payers i.e. “Reversal of capital credit for use of exempt supply for
others”. Step by step rule with examples and remarks are given as
under:

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 Rule Identification Particulars Remarks Example -
Exempt Supply = 20,
Taxable Supply= 80;
Total Supply=100
Example 1 (Simple Example 2 (Purchase Example 3 (Purchase
Purchase) for 100% Exempt for 100% Taxable
supply later later converted to
converted to Partially Partially Exempt
Exempt) supply)
43(1)(a) P No credit if used for No Credit to electronic Date of Purchase of
non-business purpose Credit Ledger (ECL). Capital Good
Practical FAQ’ s under GST

or used totally for Practically approach is 01.04.2018, Value of

exempt supplies to take credit and the Supply - `
Reverse it. 1,00,000/- IGST@ 18%

218
- ` 18,000/-
Useful life 5 year.
Took credit and
reversed in same
month. On 1.09.2020
used for partial exempt
supply
43(1)(b) Q Exclusively used for 100% eligible for Date of Purchase of
taxable and ZRS Credit. For Schedule II- Capital Good
Para 5 (b)- Zero as 01.04.2018, Value of
credit the Supply - `
1,00,000/- IGST@ 18%
- ` 18,000/-
Useful life 5 year. On
1.09.2020 used for
partial exempt supply
 Rule Identification Particulars Remarks Example -
Exempt Supply = 20,
Taxable Supply= 80;
Total Supply=100
43(1)(c) R Other than a and b as Life of same Will be Date of Purchase of
above, rest will be counted as 5 years Capital Good
Denoted as "A" from the Date of 14.07.2020, Value of
Invoice the Supply - `
1,00,000/- IGST@ 18%
- ` 18,000/-
Useful life 5 year.
Proviso Convert from P to R Credit to ECL and "T" Now converted into
=Period which it stays effecting both types of
under P will be supplies. 2018= 3

219
calculated and "trf" to Quarter, 2019= 4
output tax liability with Quarter, 2020= 3
5% per quarter or part quarter. So 10 Quarter,
thereof Rs 18000*5%*10= Rs
9,000/- [This amount
pertain to 100%
exempt supply period,
which is ineligible for
ITC]
43(1)(d) Total credit to Total credit firstly to be Amount to be taken Tc =18000
ECL(Tc ) =Amount of taken as Credit = ` 18000/-, with
R + amount of credit Rs 18000/- to ECL Reversal as
if Q is converted to ` 9,000/-
Input Tax Credit

R later, then amount

 Rule Identification Particulars Remarks Example -
Exempt Supply = 20,
Taxable Supply= 80;
Total Supply=100
of Q also
43(1)(e) Tm is to be calculated Tm= Tc /60 (Better to Rs18000/60, Rs18000/60, Tm= 18000/60= 300/-
calculate same for Answer comes to Answer comes to
as Tc divided by 60
each fixed asset ` 300/- ` 300/-
separately, as Life of 5
years is required to be
counted from date of
Practical FAQ’ s under GST

invoice)
43(1)(g) Te i.e. ITC for Exempt Te = (E÷ F) x Tr 60 [300*20/100] 60 [300*20/100] 60 [300*20/100]

220
supply to be
calculated as
E = aggregate value Answer comes to Answer comes to
of exempt supplies, ` 60/- ` 60/-
made, during the tax
period
F=total turnover 8[in
the State] of the
registered person
during the tax period
Proviso for Builder
and Promoter
Proviso further If no turnover during
the period, last tax
period needs to
 Rule Identification Particulars Remarks Example -
Exempt Supply = 20,
Taxable Supply= 80;
Total Supply=100
consider for calculation
43(1)(h) Amount Calculated as with interest ` 60/- is amount ` 60/- is amount ` 60/- is amount
Te to be added to applicable for Exempt applicable for Exempt applicable for Exempt
Output tax liability supply, the same need supply, the same need supply, the same need
to be reversed in to be reversed in to be reversed in
GSTR-3B Table at ITC GSTR-3B Table at ITC GSTR-3B Table at ITC
as under Rule 43 and as under Rule 43 and as under Rule 43 and
also Interest need to also Interest need to also Interest need to
be paid from date of be paid from date of be paid from date of
credit to the month of credit to ECL to the credit to ECL to the

221
reversal i.e. ` 60/- month of reversal i.e. month of reversal i.e.
reversal month ` 60/- reversal month ` 60/- reversal month
Explanation: Exempt T r is used as formula,
supply to exclude but its calculation is
Interest receipt removed from Rule as
43(1)(f) is omitted
Interest Liability From Date of Credit= Very Less as now Very High, as credit
Normal credit is taken was taken long back
and now reversed
Input Tax Credit
Practical FAQ’s under GST

Q244. Restaurants charging GST @5% on the sales are not allowed to
take ITC. If they have taken any services which is directly
associated with main service, whether they are allowed to take
credit in respect of that supply
Ans. Explanation No. (iv) to NN 12/2017-CTR provides as under:
Wherever a rate has been prescribed in this notification subject to
the condition that credit of input tax charged on goods or services
used in supplying the service has not been taken, it shall mean
that,—
a) credit of input tax charged on goods or services used
exclusively in supplying such service has not been taken; and
b) credit of input tax charged on goods or services used partly for
supplying such service and partly for effecting other supplies
eligible for input tax credits, are reversed as if supply of such
service is an exempt supply and attract provisions of sub-
section (2) of section 17 of the CGST Act, and the rules made
thereunder.
ITC on goods or services is not available for restaurants charging a
tax rate of 5%. The rates prescribed are mandatory rates and the tax
cannot be levied at any other rate. This has been explained in the
Explanation to Heading 9963 in the exemption notification.
Q245. If builders opt for concessional GST @5%, on what services/
goods procured can they take ITC?
Ans. With effect from 01-04-2019, the effective rate of GST (after 1/3rd
deduction towards value of land) applicable on construction of
residential apartments by promoters in a real estate project are 1%
for affordable residential apartments & 5% for other than affordable
residential apartments. These rates are applicable with the condition
that the tax is to be paid in cash by debiting the electronic cash
ledger only and also the credit of the ITC on goods or services used
in supplying the service has not been taken. Thus, no credit is
available on any goods or services received by the builder.
Q246. X, a Chartered Accountant in practice, bought a pair of
spectacles without which he cannot read, study, drive etc., and
thereby cannot perform professional obligations. Whether

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 Input Tax Credit

purchase of spectacles can be classified as supply used in the

course of profession and hence can claim ITC? Whether,
ITC will be available if X provides to his employee's spectacles
for their use in performing office work, since section 17(5)
blocks ITC on health services but not on goods?
Ans. Spectacles purchased by a professional of self or for his employees
is an expenditure of personal nature and the same is blocked under
section 17(5) of the CGST Act. The personal element does not
differentiate between goods and services.
Q247. The books of account of XYZ Ltd. were subject to Income Tax
Audit and during such audit the Chartered Accountant observed
that the exemption claimed on interest is not as per the Circular
No. 73/47/2018-GST, dated 5-11-2018 and accordingly suggested
to create a provision for such short pay-out.
The management of M/s. XYZ was ready to pay the tax but
wants to know the following:
a. Can they collect the tax from their debtor?
b. Can they suggest to their debtor that the tax paid is
available to them as ITC?
Ans. In the present query, the registered person wants to make the
payment voluntarily along with interest. Section 73 of the CGST Act,
provides a unique opportunity of self-correction to the registered
person i.e., if a registered person has not paid, short paid or has
erroneously obtained/been granted a refund or has wrongly availed
or utilized ITC then before the service of a notice by any tax
authority, the registered person may pay the amount of tax with
interest.
For the queries raised by the management the reply will be as
follows:
o Sub-section (3) of section 34 of the CGST Act, permits the
registered person to issue debit note to collect the tax.
o They have to declare the particulars of such debit note in
Form GSTR-1 of the tax period.

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Practical FAQ’s under GST

o Sub-section (4) of section 16 of the CGST Act (as amended)

permits the receiver to take credit on such debit note issued by
the supplier.
Note: If the management pays the tax against the finding of the
Departmental officer in notice issued under section 74 (5) of the
CGST Act, the above reply will be negative.
Q248. Is it necessary for the recipient to reverse the ITC on discount,
which is received by him after the supply has been effected?
Ans. The answer will depend on two conditions:
(a) Whether or not the discount meets the conditions of
section 15(3) (b) (i) of the CGST Act, that is, discount is
established as per the agreement entered into at or before the
time of supply and specifically linked to relevant invoices.
(b) Credit note issued by the supplier is with GST in terms of
section 34 of the CGST Act
Accordingly, answer is given below considering two possible
scenarios (A) and (B):
(A) Discount is as per the agreement entered into at or before
the time of supply and specifically linked to relevant
invoices, but being passed on after supply has been
effected: In this situation, the supplier may issue credit note for
the discount amount plus the corresponding tax thereon as the
transaction fulfils the conditions of section 15(3) (b) (i) of the
CGST Act. Assuming that the credit note is issued with GST
within the time line provided under section 34 (2) of the CGST
Act, the supplier can exclude the discount from value of supply
and also reduce his tax liability. In order to complete the
process and enable the supplier to make adjustment in value of
supply as well as tax liability, it is necessary for the recipient to
reverse ITC on discount, as required under section 15 (3) (b) (ii)
of the CGST Act. With such reversal, the tax paid and ITC
availed against the same will match at invoice level between the
supplier and recipient.
Where the supplier decides not to issue a credit note under
section 34 of the CGST Act or is unable to issue the same due

224
 Input Tax Credit

to non-satisfaction of any condition under section 34 of the

CGST Act, then there would not be any reduction in output tax
liability involved for the supplier. Supplier may issue an
accounting / commercial / financial credit note without impact of
GST. Further, the recipient would not be liable to reverse the
ITC for the reasons provided in Point B below.
(B) Discount not known or agreed at or before the time of
supply is given by the supplier post sale due to certain
business exigencies which were not considered earlier or
where discount cannot be specifically linked to respective
Invoices:
In such a situation, the supplier can issue credit note for the
discount amount, generally referred to as financial or
commercial credit note, but since the requirements of
section 15 (3) (b) of CGST Act are not met, the supplier cannot
reduce the discount from the value of supply and accordingly he
cannot reduce his corresponding tax liability on discount
amount. Thus, what he passes on to the recipient is the credit
on the entire value of supply before discount. This position is as
noted and clarified at point D “Secondary Discounts” of CIR 92 .
Here, the recipient pays to supplier basic amount plus tax as
initially invoiced as reduced by the secondary discount provided
at a later stage. The only provision which links the eligibility of
ITC with the payment of consideration to the supplier is proviso
to section 16(2) of the CGST Act read with Rule 37 of the CGST
Rules. Failure to pay to the supplier within 180 days from the
date of issue of invoice entails reversal of ITC taken earlier as
per the said provisions. However, non-payment due to the
reduction in the value of supply should not be equated with
failure to pay. Only then one can state that reversal of ITC
would not be attracted if credit note is received without GST by
any recipient of supply. This provision has been discussed
below:
1 Failure to pay should ideally arise in a situation where there
is a requirement to pay in the first place. On issuance of an
accounting/ financial/ commercial credit note by the
supplier, there is an acknowledgement by the supplier

225
Practical FAQ’s under GST

himself that there is no further requirement of payment.

Where no payment is required, there cannot be a failure to
pay.
2 Further, the payment required is towards the value. Through
the credit note, the value which is required to be paid itself
decreases. There is no further obligation of payment and
the recipient stands discharged once he makes the
payment net of the credit note. No reversal of ITC should
be made in such a situation
3 ‘Failure to pay’ is due to inaction by the recipient where they
are unable to perform the positive activity of having made
the payment within the specified time limit. However, when
the credit note is received which dispenses with the
requirement of having to make further payment, no further
action is required by the recipient to the extent of the value
of credit note. When no action is required, there cannot be
any inaction on the part of the recipient. The recipient
should not be penalized when there is no failure or inaction.
Therefore there should not be any reversal of ITC.
4 Payment is also considered to have been made through
book entry. There is no requirement of having a monetary
consideration in each and every case. When the supplier’s
obligations are completed through a book entry, that itself
can be considered as equivalent to payment. Where there
are no pending obligations, there cannot be a failure to pay
on the part of the recipient.
5 The mechanism of payment can be through netting of the
payables and receivables. What is required to be paid is to
be set off partly against receivables in the form of credit
note from the point of view of the recipient. After this set off
happens and the balance payment is made, both the parties
are relieved of their obligations. Thereby the payment is
already considered to have been made. As a result, failure
to pay cannot arise in such a situation.
6 Raising of the credit note is a unilateral action by the
supplier. It is the prerogative of the supplier whether to raise

226
 Input Tax Credit

a credit note within the GST law or a financial credit note

without GST. Where due to no fault of the recipient, he has
no option but to simply accept the credit note raised by the
supplier, there should not be any penalty leviable on such
recipient. Thereby, no reversal of ITC should be made by
the recipient
7 Financial credit notes are subject to mutual dealings
between the supplier and the recipient. There should not be
any losses to any of the parties due to such dealings in B2B
transactions. However, in this pure business transaction,
there can be a loss to the recipient if the full amount paid as
tax is not allowed as credit.
8 Allowance of credit on the undiscounted value without any
reversal of ITC due to financial credit note is a revenue
neutral exercise. This is because when the original supply
had occurred, the complete ITC was availed by the
recipient. At the time of reduction of the original value, if
there is no reversal of output tax liability, ITC should not be
reversed either. In this situation, no loss is caused either to
the Government or the taxable person.
However, where the ITC is to be reversed by the recipient, it
results in a loss proportionate to the value of credit note as
the output tax liability had already been paid in full by the
supplier. A simple business decision of giving credit note
without GST due to any reason should not cause any loss
to any person in the credit chain.
9 Reference may be made to Circular No.122/03/2010 dated
30.04.2010 issued under the erstwhile law in the context of
CCR 2004 in respect of services and also Circular No.
877/15/ 2008 –CX. dated 17.11.2008 regarding reversal of
CENVAT Credit, in case of subsequent trade discount or
reduction / short payment of value. It is clearly provided
that payment through debit in books of accounts should
also be construed as payment. Further, it goes on to explain
that where the settled payment by the recipient is less than
the amount shown in the original invoice, the invoice would

227
Practical FAQ’s under GST

stand amended to that extent. It finally says that the credit

would be equivalent to the amount paid as tax. Though
issued under earlier Acts, the circulars have persuasive
value and they support the view that taxes paid and not
subsequently reduced would be fully available to the
recipient as credit.
10 Circular No.105/24/2019 - GST dated 28.06.2019 , at para 5
provides:-
“the dealer will not be required to reverse ITC
attributable to the tax already paid on such post -sale
discount received by him through issuance of financial /
commercial credit notes by the supplier of goods - - - - - -
- - - - - - - as long as the dealer pays the value of supply
as reduced after adjusting the amount of post- sale
discount - - - - - - - - - - plus the amount of original tax
charged by the supplier".
Though this Circular has been withdrawn by the Board ab-initio vide
Circular No.112/31/2019 - GST dated 03.10.2019, in view of
representations received expressing apprehensions on the
implication (of other) clarifications given therein relating to treatment
of secondary or post sale discounts, the aforesaid clarification
adequately amplifies/ clarifies thinking on the part of Board that
reversal of credit is not required in such cases.
From the above, it can fairly be said that where credit note is
received without GST, it is not necessary for the recipient to reverse
ITC attributable to the value of discount.
Q249. In case an invoice of a supplier is dated more than 6 months
old, can ITC be availed if- (a)payment is made within six months
from the date of invoice and (b)payment is made after six
months from the date of invoice
Ans. a) If payment is made within six months of the date of invoice
If the payment for the invoice is being made within 6 months
from the date of the invoice, and if this date of payment is on or
before 30th September of the following FY or the date of filing of
annual return whichever is earlier, then the credit of the tax paid

228
 Input Tax Credit

on such invoice of the supplier can be taken on the date of

payment.
b) If payment is made after six months of the date of invoice
If the date of payment is within 30th September of the following
FY then ITC can be availed.
There can be another scenario where the ITC has been availed
but the payment towards the invoice has not been done in such
a case, if the payment is not made within the period of 180 days
from the date of invoice, and then the ITC so taken has to be
reversed along with interest. Once the payment of the invoice is
done, then ITC can be availed on that invoice.
Q250. Whether ITC of expenses related to CSR activities allowed/
permissible in GST?
Ans. The basic condition, as provided under section 16(1) of the CGST
Act, for eligibility to take credit of input tax charged on supply of
goods or services or both is that they are used or intended to be
used by the registered person in the course or furtherance of his
business. The CSR activities are carried out without any monetary
consideration for the same. However, such activities are obligatory
on the company in terms of the provisions of section 135 of the
Companies Act, 2013 which mandates companies subject to
specified thresholds to spend specified percentage of their profit on
CSR activities. The CSR activities are thus not in the nature of gift or
charity or some voluntary actions that cannot be enforced but have
to be incurred under obligation under law. Non-compliance of such
requirement can have implications for business and in that sense,
such expenses can be said to be incurred in the course or
furtherance of business. The expression "course or furtherance of
business" has very wide scope. Besides, being obligatory in nature,
the CSR activities help the company in improving their Brand image
in the public, win good wishes and acceptability of the society in
which it operates which are all essential for its sustainability in the
long run. In this sense also, CSR activities can be said to be
activities in the course or furtherance of business. One can therefore
strongly argue that credit should be available on the tax paid while
procuring goods and services used by company in its CSR activities.

229
Practical FAQ’s under GST

Under the erstwhile indirect tax (service tax) regime the issue was
considered by CESTAT in the case of M/s Essel Propack v.
Commissioner of CGST, Bhiwandi, decided on 31.08.2018.
CENVAT Credit in respect of CSR activities was allowed to the
appellant observing that such activities are input service in respect
of activities relating to business, production and sustainability. The
CESTAT in coming to this conclusion also observed that CSR
activities are not in the nature of charity, have a bearing on
operations of the company, are incurred to win confidence of all
stakeholders and to augment credit rating and that CSR which was
mandatory requirement for the public sector undertakings has been
made obligatory also for private sector. The CESTAT distinguished
the relied case law equating CSR with charity.
Unlike the provisions of the Income-tax Act, 1961 which specifically
deny the deduction for CSR expenses as business expenditure,
there are no provisions in GST law to specifically bar ITC for CSR
activities. However, the eligibility to ITC under section 16(1) of the
CGST Act, is subject to the provisions of section 17(5) of the CGST
Act which blocks credit in certain cases, one such being "goods lost,
stolen, destroyed, written off or disposed by way of gift or free
samples” under clause (h) thereof. These provisions of section
17(5) (h) may be invoked by the tax authorities to deny ITC on
goods distributed free of cost for meeting CSR obligations though
submission of trade would be that these are not "Gift” or they do not
fall under the other eventualities specified.
It would be seen that section 17(5) (h) of the CGST Act, merely
places ITC restriction on free distribution of goods and does not
restrict ITC on provision of services for free and there appear two
different tax treatments for the very same nature of expense - goods
and services. It can therefore be argued that for services provided
free of cost in the course of CSR activities such as provision of food,
medical services, educational services, construction of facilities like
schools, roads, wells for water supply, manpower assistance, hire of
means of transport, hire of equipment, shelter in rented premises
etc. ITC is not blocked under section 17(5) (h). However, guided by
the position under the Income-tax Act with regard to tax deduction
for CSR activities and also the possible treatment under GST Law

230
 Input Tax Credit

for goods used in CSR activities, with regard to services used in

CSR activities, the possibility of the authorities taking a view that
CSR obligation is the amount to be spent by the assesse without
any tax relief from Government, cannot be ruled out.
Thus, while taking any decision on ITC for the CSR activities, one
has to keep in mind its potential for litigation and take a call
accordingly.
Q251. Whether ITC of GST paid on premium for Life Insurance Policies
of employees is an eligible claim?
Ans. Generally, the GST paid on Life Insurance Policy of employees is
not an eligible claim. However, with effect from 01-02-2019, a
proviso has been inserted to section 17(5) (b) of the CGST Act,
which entitles an entity to claim GST paid on life insurance premium,
on the condition that it is obligatory for an employer to provide the
life insurance under any law for the time being in force. Hence, an
entity will be eligible to claim GST paid on Life Insurance Policies
obtained to comply with an obligation under any law for the time
being in force.
E.g.: Employee Deposit Linked Insurance Scheme Act, 1976 applies
to all employees to whom the provisions of EPF Act, 1952 are
applicable. This requires contribution only from the employer. GST
paid on such schemes would also be eligible for the ITC.
Q252. A. is involved in car dealership business and claiming ITC on
purchase of cars; subsequently these cars are sold at prices
below the purchase price because of heavy discounts on sale.
Whether excess ITC on such purchase can be adjusted on other
sales or the ITC has to be reversed?
Ans. If the person is a dealer in new cars and not second hand cars ITC
on the input can be taken for the intended use in the course of
furtherance of the business. The ITC available to it can be used in
the same GSTN for other types of sale also, provided all conditions
of ITC are fulfilled.
Q253. If a manufacturer gives a discount by way of credit note, what is
the position of law in respect of such discount? Please discuss
from the perspective of both the supplier and recipient.

231
Practical FAQ’s under GST

Ans. From the perspective of supplier: If such discounts are as per pre-
sale agreement, the value of discount/tax thereon can be reduced
from the value of supply made during the month in which such
discounts are given. It is also essential to ensure that the recipient
also reverses his ITC attributable to such discount.
From the perspective of recipient: If the credit notes are issued
with GST component, the recipient should reverse the corresponding
GST.
Even if the credit notes are issued without GST component, then
also the recipient has to reverse the proportionate GST as per the
second proviso of section 16(2) of the CGST Act.
Q254. During the course of audit of FY 2018-19 in the UT of Jammu
and Kashmir, the auditor observed that an assessee had
claimed the ITC of 2018-19 in the month of September, 2019
filed on 24th March, 2020. Whether the assessee will be eligible
to claim the set off of 2018-19 considering the restrictions
under section 16(4) of the CGST Act?
Ans. Yes, the assessee will be eligible to claim the input tax credit of
2018–19 vide Form GSTR-3B filed on 24.03.2020, since the due
date for filing GST Return in Form GSTR-3B for the month of
September, 2019 for UT of Jammu and Kashmir was extended from
20th October, 2019 to 24 th March, 2020.
Q255. An Insurance Company also earns income such as interest and
dividend. These incomes are not shown in Form GSTR-1 and
Form GSTR-3B, either as outward supply or non-GST supply.
Will the company have to restrict ITC to the extent of such
exempt/ non-GST supply?
Ans. (a) Interest: Rule 42 of the CGST Rules, prescribes the manner of
determination of ITC in respect of inputs and input services for
reversal of common ITC in respect of exempt supplies.
Explanation (b) to rule 43(2) of the CGST Rules, states that the
aggregate value of exempt supplies determined under rule 42,
shall exclude the value of interest on deposits in respect of
extending of loans or advances except in case of a banking
company or a financial institution engaged in supplying services

232
 Input Tax Credit

by way of accepting deposits, extending loans or advances.

Hence, the company will not be required to restrict the ITC to
the extent of exempt supply of interest on deposit / loan /
advance earned.
(b) Dividend: Dividend income arises on account of holding of
shares by the shareholders in a company. Securities have been
defined under section 2(101) of the CGST Act, read with section
2 of the Securities Contract (Regulation) Act 1956 to include
shares. Hence, shares are securities. The definition of goods
and services as defined under section 2(52) and section 2(102)
of the CGST Act, respectively excludes securities from the
definition of goods and services respectively. Further, in the
case of Kantilal Manilal v. CIT., the Supreme Court while
interpreting the definition of 'dividend' held that dividend in its
ordinary meaning is a distributive share of the profits or income
of a company given to its shareholders. Distribution of profit by
a company to shareholders cannot be a supply. When it is not at
all a supply under CGST Act, the company need not restrict the
ITC in respect of dividend.
Q256. Equal ITC under CGST and SGST claimed in Form GSTR-3B in
place of IGST and after set off correct SGST liability paid
through Form GSTR-3B i.e. net effect of ITC is the same;
Whether ITC is available? Should it be paid and if paid then
what about ITC of IGST?
Ans. Section 42 of the CGST Act requires matching of the input tax with
corresponding output tax of the supplier. However, the ITC
misclassification mistake can be rectified, if the due date of the
return of September of the succeeding year has not lapsed
[Section 16(4) of the CGST Act]. The classification can be rectified
in any of the return of the succeeding year filed upto the due date of
September or any return filed upto September, whichever is earlier.
If the due date of September return has lapsed, the assessee is
required to pay the incorrectly claimed ITC and any ITC not claimed
correctly upto the return of September will lapse.
Q257. A Pvt. Ltd. Company has two segments of business. In one
segment, it exports information technology related services
with a turnover is ` 8 Crores in Maharashtra (zero rated supply -

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Practical FAQ’s under GST

exempt). Its second business, has 2 malls in Maharashtra and

local business sale turnover is ` 2 crores (input tax is 16 lakhs).
It pays rent ` 10 lakhs p.a. How much will be the input credit;
is it ` 16 lakhs fully or only 20 % of the total turnover of
` 10 crores i.e. in the ratio of total turnover including export
turnover?
Ans. Export of goods or services or both shall be treated as zero-rated
supplies under section 16 of the IGST Act, and hence they are not
exempt supplies under GST.

Section 17(2) of CGST Act provides:

“Where the goods or services or both are used by the registered
person partly for effecting taxable supplies including zero-rated
supplies under this Act or under the Integrated Goods and
Services Tax Act and partly for effecting exempt supplies under
the said Acts, the amount of credit shall be restricted to so much
of the input tax as is attributable to the said taxable supplies
including zero-rated supplies.”
Hence, there is no restriction on availing ITC for zero rated supplies
(exports) and A Pvt. Ltd Co. shall be eligible to avail full ITC i.e.
`16 lakhs.
Q258. Whether ITC can be claimed by the recipient when the supplier
has not recorded the transaction in his books of accounts
during the year, but the supplier has issued the bill, supplied
the goods, received payment and has also filed the return with
GST Department, but has omitted to record the same in his
books of accounts during the year. Can ITC be claimed by the
recipient?
Ans. Yes, ITC can be claimed by the recipient on such purchases as
conditions stipulated under section 16 of the CGST Act, are satisfied
and the ITC is not blocked under section 17 of the CGST Act,.
However, where audit is applicable under the GST Act, appropriate
remarks are required to be recorded for the difference appearing in
the statement of reconciliation in Form GSTR-9C in the supplier’s
GST Audit.

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 Input Tax Credit

Q259. Whether ITC is admissible in the case of Initial Public Offer

(IPO) expenses?
Ans. Yes. ITC is admissible in the case of Initial Public Offer (IPO)
expenses.
IPO is the process by which a "private" company can go “public" by
sale of its stocks to general public. An IPO basically allows a
company to tap into a wide pool of potential investors to provide
itself with capital for its business investments, working capital or to
reduce onerous debt burden. IPO expenses like legal charges,
registrar fees, underwriting commission, bank charges, publicity
expenses etc. Would merit treatment as services used or intended
to be used in the course or furtherance of business.
As per Section 16(1) of the CGST Act, the company would be
entitled to take credit of input tax charged on supply of such services
to it for IPO as these services are used or intended to be used in the
course or furtherance of business as briefly explained earlier.
Moreover, there is no blocking provision under section 17(5) of the
CGST Act, in respect of such expenses. Hence, ITC can be availed
in case of IPO expenses.
In the erstwhile indirect tax regime, under the CCR 2004, Rule 2(l)
defines ‘input service’. In terms of Rule 2(l), services used in relation
to financing were considered as input services eligible for credit. The
issue of eligibility of IPO expenses for credit was considered by
CESTAT, Bangalore Bench in M/s Kermax Microsystems (India)
Limited v. Commissioner of Central Excise, Customs and Service
Tax, Hyderabad II; [2016 (42) STR 533] wherein the IPO was
arranged by the company for expansion of its activities. The Tribunal
held that CENVAT Credit on input services like advertisement, used
for collecting capital through IPO by the appellant could not be
denied. Definition of 'input services 'under rule 2(l) of CCR 2004 is
wide enough to cover such services.
Further, where the company making IPO is an altogether new
company that has not yet started its operations, to be eligible for
credit on IPO expenses, it will have to ensure that its registration
under GST is in place before hand, (by applying for voluntary
registration under section 25(3) of the CGST Act), since in terms of

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the provisions of section 18 (1) and (2) of the CGST Act, ITC for
services will be available only on registration.
Q260. As per Sr. No. 2 of NN 12/2017-CTR, sale of going concern
attracts NIL rate of tax. What will be the impact of this
transaction on credit for input services commonly used in all
such undertakings? Will any portion of such credit have to be
surrendered / reversed because of sale of the undertaking?
Ans. The transfer of business as a going concern will be treated as a
supply of service under Schedule II of the CGST Act, and the same
is exempted from tax as per NN 12/2017-CTR.
With the above transaction, the company has effected exempt
supply, apart from any other exempt supplies made by it across its
undertakings registered under same registration. The case of the
company would get covered under the provisions of section 17(2) &
(3) of the CGST Act, that is, partly effecting taxable supplies
including zero-rated supplies and partly effecting exempt supplies,
and the amount of credit will have to be apportioned between such
taxable supplies and exempt supplies and shall be restricted to so
much of credit as is attributable to taxable supplies including zero-
rated supplies. The computation of credit attributed to exempt supply
will have to be done as per rule 42 of the CGST Rules, and added to
the output tax liability. The sale value of the undertaking will be
included in the aggregate value of exempt supplies for this
calculation. Thus, in effect, broadly such proportion of credit for
common input services as attributed to such sale by ratio of thereof
to the total turnover of the company in the State will be added to the
output tax liability. This is because though transfer of a going
concern, as a whole or an independent part thereof, is treated as
exempt service, no exclusion in respect thereof is available while
apportioning input credit between taxable and exempt supplies.
Q261. A registered person has units in Maharashtra and Gujarat.
Maharashtra unit is going to be closed. Huge ITC remains in
Maharashtra unit on account of movable machineries. Can the
same be transferred to Gujarat so that ITC can be transferred?
If yes, can it be transferred at WDV as per Income Tax
Act, 1961?

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 Input Tax Credit

Ans. (i) Yes. Machineries can be transferred to Gujarat at the value

determined in terms of rule 28 of CGST Rules. Since both units
are covered under same PAN they shall be regarded as
related persons and transfer shall be treated as supply as per
Entry No. 2 of Schedule I of the CGST Act, despite the fact that
no consideration is involved.
(ii) As per rule 28 of the CGST Rules, in case Gujarat unit is eligible
to take full ITC on the capital goods transferred then the value
declared in the invoice shall be taken as open market value and
tax shall be calculated on such value. In case Gujarat unit is not
eligible to take full ITC then the value of capital goods shall be
the open market value (OMV). If OMV is not available then the
value shall be of goods of like kind and quality.
(iii) After determining the value and tax as above, the same shall be
compared with value arrived in terms of section 18(6) of the
CGST Act read with rule 40 of the CGST Rules. That is tax shall
be payable on higher of the following:
o ITC availed in earlier reduced by 5% per quarter or a part
thereof from the date of purchase invoice of such goods; or
o Tax on transaction value as determined in point (ii) above.
In view of the above discussion, capital goods can be
transferred by following the above procedures and the same
cannot be transferred at the WDV as per the Income-tax Act.
Q262. Is e-invoice mandatory for taking ITC? If yes, what are the
consequences of non-compliance?
Ans. As per Notification No. 68/2019 – Central Tax dated 13.12.2019; the
Central Government has brought out 8th Amendment to the CGST
Rules. Under this notification sub-rules (4) and (5) have been
inserted in rule 48 of the CGST Rules, which sets out the
requirement of invoice for specified suppliers given as under:
“(4) The invoice shall be prepared by such class of registered
persons as may be notified by the Government, on the
recommendations of the Council, by including such particulars
contained in FORM GST INV-01 after obtaining an Invoice
Reference Number by uploading information contained therein on

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Practical FAQ’s under GST

the Common Goods and Services Tax Electronic Portal in such

manner and subject to such conditions and restrictions as may
be specified in the notification.
(5) Every invoice issued by a person to whom sub-rule (4)
applies in any manner other than the manner specified in the said
sub-rule shall not be treated as an invoice.”
Hence, it can be said that once the e-invoice has become mandatory
ITC can be taken only on the basis of such e-invoice and non-
compliance could result in disallowance of ITC.
Note- E–invoice has been made mandatory from 1-10-2020 for
registered person, whose aggregate turnover exceeds ` 500 crores
in any preceding financial year from 2017-18 onward and from
1-01-2021 for those exceeding ` 100 core.
Q263. X, a registered person, have availed service from a service
provider and paid GST on the same and has also taken ITC on
the same. But the service provider has not filed any returns
under the Act. Would X be eligible to claim input on the basis of
Invoice?
Ans. No, ITC in the given facts will not be available to the recipient of the
service. Section 16 (2)(c) of the CGST Act, provides that if the tax
charged by the supplier is not paid to the government either by cash
or utilisation of credit, the recipient of services is not entitled to avail
the ITC. Further section 42 of the CGST Act mandates matching of
ITC with tax paid by the supplier and any excess credit taken by the
recipient is required to be reversed.
Further, Rule 36 (4) of the CGST Rules also mandates a cap of 10%
for unmatched ITC for invoices which have not been uploaded by
the supplier. In other words, difference between ITC as claimed in
Form GSTR-3B and as reflected in Form GSTR-2A cannot be more
than 10% of the eligible ITC as per Form GSTR-2A.
Q264. Do we need to reverse the credit of IGST on Import of goods if
the payment to exporter is not made by the importer?
Ans. As per proviso to section 5 (1) of the IGST Act, IGST on import of
goods will leviable to IGST as per section 3 of the Customs Tariff

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Act, 1975. Further section 3 (7) of the Customs Tariff Act, creates a
levy of IGST on import of goods.
The definition of reverse charge given under section 2(98) of the
CGST Act reads thus:
“reverse charge” means the liability to pay tax by the recipient of
supply of goods or services or both instead of the supplier of
such goods or services or both under sub-section (3) or sub-
section (4) of section 9, or under sub-section (3) or sub-section
(4) of section 5 of the Integrated Goods and Services Tax Act;”
In other words, IGST on import of goods is not considered as
reverse charge tax under GST law.
The second proviso to section 16 (2) of the CGST Act, reads as
under:
Provided further that where a recipient fails to pay to the
supplier of goods or services or both, other than the supplies on
which tax is payable on reverse charge basis, the amount
towards the value of supply along with tax payable thereon
within a period of one hundred and eighty days from the date of
issue of invoice by the supplier, an amount equal to the input tax
credit availed by the recipient shall be added to his output tax
liability, along with interest thereon, in such manner as may be
prescribed”
It is evident that this proviso doesn’t apply to supplies on which tax
is payable on reverse charge basis, but as discussed above import
of goods is not a supply under reverse charge basis and hence this
proviso, in so far as this condition is concerned, shall apply.
Further, the proviso mandates that value of supply along with tax is
paid to the supplier; in case of imports value is payable to the
supplier whereas tax is payable to the Government directly and
hence an importer is not covered by this proviso.
Reading the proviso further, it mandates that payment is required to
be made within 180 days of date of issue of invoice.
‘Invoice’ is defined in section 2 (66) of the CGST Act as under:
(66) “invoice” or “tax invoice” means the tax invoice referred to
in section 31;

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Section 31 of the CGST Act, mandates invoice to be issued by

registered person supplying goods and a person who is required to
pay tax under RCM, an importer clearly doesn’t fall in any of these
situations. Hence, there is an absence of ‘Invoice’ in the case of an
importer and therefore the proviso shall not apply to a transaction
involving import of goods.
In view of the above discussion an importer will not be required to
reverse the credit taken of IGST paid by him on import of goods for
failure to pay the consideration to the exporter.
Q265. X, (owner of a medical shop) a registered person, sold
medicines to the customers. However the medicines have been
returned by the customer. Please explain the ITC provisions
with respect to return of supplies.
Ans. Section 34 (1) of the CGST Act, provides that where the goods
supplied are returned by the recipient, the supplier can issue a credit
note to the buyer containing all the particulars as prescribed in
Rule 53 of the CGST Rules for reversing the output tax paid at the
time of issuance of original invoice.
Further, section 34 (2) of the CGST Act mandates that such credit
notes issued by the supplier have to be declared in the return for the
month in which they has been issued. However, it also provides that
such credit notes can be reported not later than September following
the end of the financial year in which such supply was made, or the
date of furnishing of the relevant annual return, whichever is earlier,
and the tax liability shall be permitted to be adjusted. It also provides
that reduction in output tax liability of the supplier shall not be
permitted, if the incidence (burden) of tax and interest on such
supply has been passed on to the customer.
Example: A Chemist shop sells medicines to a customer on
01.03.2020 worth ` 1,000 plus GST ` 180 and he returns all the
medicines on 10.08.2020. Chemist refunds the entire payment of
` 1,180 to the customer. The chemist can issue a credit note for
` 1,180 (Basic 1000 + GST 180) to the customer and upload the
same in August month Form GSTR-1 and also reduce his August
2020, output tax by 180 while filing Form GSTR-3B for this month.
He can also upload the same in the September returns but not later

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than that. However, if the said chemist issues a credit note of

` 1,000 (Basic amount only) to the customer, then in such case
reduction of output tax liability is not permitted as incidence (burden)
of tax has been passed on to the customer
Q266. If X pays RCM liability of FY 2017-18 in FY 2020-21 along with
interest. Can he claim ITC on the GST so paid? Is the time limit
to claim ITC applicable to ITC on RCM as well?
Ans. As per section 31 (3) (f) of the CGST Act, a registered recipient who
is liable to pay tax under RCM is required to issue an invoice in
respect of goods or services received by him from the supplier who
is not registered on the date of receipt of goods or services or both,
accordingly the responsibility of issuing invoice in case of RCM is
cast on the recipient and the last date for issuance of such an
invoice is on the date of receipt of goods or services.
Section 16(4) of the CGST Act, provides that a person shall not be
entitled to take ITC in respect of any invoice after the due date of
furnishing of the return of September following the end of financial
year to which such invoice pertains or furnishing of the relevant
annual return, whichever is earlier.
In the given facts, RCM liability pertains to FY 2017-18 which means
that the underlying goods or services were received in 2017-18. As
discussed above, as per section 31 (3) (f) of the CGST Act, the
taxpayer is mandated to issue a self-invoice latest by the date of
receipt of the goods or services which in this case should have been
issued in 2017-18. Now on reading section 16 (4) of the CGST Act, it
is clear that any ITC can be claimed latest by the due date of
September return for the next financial year.
Accordingly, ITC of FY 2017-18 cannot be claimed in FY 2020-21
even if the underlying tax was paid in FY 2020-21 with interest.
Q267. A non-resident Indian is having property in India from which he
earns rental income. For paying GST on such rental income he
has taken registration as non-resident taxable person” under
GST in India. Every year he comes to India for renewal of
agreements. Whether ITC will be available to him for the
purchase of laptop, printer, Mobile phone and flight tickets?

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Ans. Chapter V (sections 16 to 21) of CGST Act contains provisions on

ITC. Sub-section (5) of section 17 of CGST Act, 2017 contains list of
blocked ITC i.e., ITC which cannot be taken by the taxpayer.
Clause (f) of sub-section (5) of section 17 is as under:
“(5) Notwithstanding anything contained in sub-section (1) of
section 16 and subsection (1) of section 18, input tax credit shall
not be available in respect of the following, namely: —
(f) goods or services or both received by a non-resident taxable
person except on goods imported by him;”
Thus, ITC cannot be taken by the person registered as non-resident
taxable person except on goods imported by him.
In the instant case, ITC is related to purchase of laptop, printer,
mobile phone and flight tickets, none of which is imported and
hence ITC in respect of any such goods will not be available to the
non-resident taxable person.
Q268. The taxpayer is a luxury bus operator having AC and Non-AC
buses engaged in transportation of passengers within and
outside the State. Can he take ITC for tax paid on supplies of
bus body building and supply of vehicles received by him?
Ans. NN 11/2017-CTR as amended by Notification No. 31/2017 -Central
Tax (Rate) dated 13.10.2017 provides the service wise GST rate to
be charged by the supplier on supply of service on fulfilment of the
condition mentioned against the entry, if any. Following are the
extracts of relevant entries:

Sr. Heading Description of Rate Condition

No. Service
8 9964 (vi) Transport of 2.5 Provided that credit
passengers by of input tax
motor cab where charged on goods
the cost of fuel is and services used
included in the in supplying the
consideration service, other than
charged from the the input tax credit
of input service in

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 Input Tax Credit

service recipient the same line of

business (i.e.
service procured
from another
service provider of
transporting
passengers in a
motor vehicle or
renting of a motor
vehicle), has not
been taken.
[Please refer to
Explanation No.
(iv)]
Or
6 -

“4. Explanation—For the purposes of this notification, —

(iv) Wherever a rate has been prescribed in this notification
subject to the condition that credit of input tax charged on
goods or services used in supplying the service has not been
taken, it shall mean that,—
(a) credit of input tax charged on goods or services used
exclusively in supplying such service has not been taken;
and
(b) credit of input tax charged on goods or services used
partly for supplying such service and partly for effecting
other supplies eligible for input tax credits, is reversed as
if supply of such service is an exempt supply and attracts
provisions of sub-section (2) of section 17 of the Central
Goods and Services Tax Act, 2017 and the rules made
thereunder.”
In terms of the above-mentioned entries of the referred Notification,
there are two options available to the supplier of transportation
services:

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Practical FAQ’s under GST

Option GST Rate on ITC Availability

outward supplies
1 5% ITC on inward supplies used
exclusively in providing such
services will not be available
2 12% ITC on inward supplies will be
available

The ITC on motor vehicle used for transportation of passenger is

disallowed except when they are used for making the taxable supply
of (amongst others), transportation of passengers. In present case,
since the outward supply is transportation of passengers, ITC on the
supply of bus body building and vehicle manufacturing as received
by such person is available to him unless he opts for non-ITC rate.
Hence, if the taxpayer opts to pay GST at the rate of 5% then ITC
for such inward supplies would not be available. But if the taxpayer
opts to pay GST at the rate of 12% then ITC of such inward supplies
would be available.
Q269. As per the CGST Rules, ITC on insurance and annual
maintenance contract can be taken on receipt of last instalment
of service. Can the taxpayer avail ITC on such services when
there is no certainty that service will be required?
Ans. Availment of ITC on receipt of last instalment is specifically relevant
in case of supply of goods and not in case of supply of service. The
same has been prescribed in the first proviso to sub-section (2) of
section 16 of CGST Act. The said proviso is as under:
“Provided that where the goods against an invoice are received
in lots or instalments, the registered person shall be entitled to
take credit upon receipt of the last lot or instalment”
In the present case, an AMC or insurance service is primarily an
assurance which is received on the date of entering into the AMC
and what follows is only a fulfilment of the obligation of the supplier
for the period under the contract. Hence the service is received on
the date when such right to receive the indemnity is received by the
recipient. Making good of actual loss is not a service.

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 Input Tax Credit

Thus, on the basis of the above interpretation, ITC can be availed on

the date of entering into such insurance and annual maintenance
contract if such ITC is eligible; otherwise as per the provisions of
sections 16 and 17 of the CGST Act.
Q270. Whether the recipient of inward supply of goods or services is
eligible to take ITC in respect of inward supply which is
reflected in Form GSTR-2A of the recipient but invoices of such
inward supply is not available with the said recipient?
Ans. Under the GST law, a tax invoice is an important document. It not
only proves the supply of goods or services but is also an essential
document for the recipient to avail ITC. A registered person cannot
avail ITC unless he is in possession of a tax invoice or a debit note.
• Section 16 of the CGST Act dealing with eligibility to avail ITC
reads:
“(1) Every registered person shall, subject to such conditions
and restrictions as may be prescribed and in the manner
specified in section 49, be entitled to take credit of input tax
charged on any supply of goods or services or both to him
which are used or intended to be used in the course or
furtherance of his business and the said amount shall be
credited to the electronic credit ledger of such person.
(2) Notwithstanding anything contained in this section, no
registered person shall be entitled to the credit of any input
tax in respect of any supply of goods or services or both to
him unless,-
(a) he is in possession of a tax invoice or debit note issued
by a supplier registered under this Act, or such other
tax paying documents as may be prescribed;
(b) he has received the goods or services or both.
Explanation.-— For the purposes of this clause, it shall
be deemed that the registered person has received the
goods or, as the case may be, services-
(i) where the goods are delivered by the supplier to a

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Practical FAQ’s under GST

recipient or any other person on the direction of

such registered person, whether acting as an agent
or otherwise, before or during movement of goods,
either by way of transfer of documents of title to
goods or otherwise;
(ii) where the services are provided by the supplier to
any person on the direction of and on account of
such registered person.
(c) subject to the provisions of [section 41 or section 43A],
the tax charged in respect of such supply has been
actually paid to the Government, either in cash or
through utilization of input tax credit admissible in
respect of the said supply; and
(d) he has furnished the return under section 39 :
Provided that where the goods against an invoice are
received in lots or instalments, the registered person
shall be entitled to take credit upon receipt of the last
lot or instalment:
Provided further that where a recipient fails to pay to
the supplier of goods or services or both, other than the
supplies on which tax is payable on reverse charge
basis, the amount towards the value of supply along
with tax payable thereon within a period of one hundred
and eighty days from the date of issue of invoice by the
supplier, an amount equal to the input tax credit availed
by the recipient shall be added to his output tax liability,
along with interest thereon, in such manner as may be
prescribed:
Provided also that the recipient shall be entitled to avail
of the credit of input tax on payment made by him of the
amount towards the value of supply of goods or
services or both along with tax payable thereon.”
According to section 16(2) (a) of the CGST Act, one of the
conditions to avail ITC is, the recipient must have been in
possession of tax invoice of inward supply of goods and

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 Input Tax Credit

services as issued by a registered supplier. Thus, to

conclude even if the details of the Invoice is uploaded by
supplier & reflected in Form GSTR-2A in respect of inward
supply but the recipient is not in possession of tax invoice
then he will not be eligible to claim the said ITC. Such
recipient can request for a duplicate copy of such invoice
from the supplier to substantiate his claim.
Q271. Suppose a person buys goods @ 18% and takes ITC, and later
on the GST rate on such goods is reduced to 12%, is there any
need to make any reversal of ITC?
Ans. The conditions for availing ITC have been specified in section 16(2)
of the CGST Act. [Please refer QNo. 270 for Section 16(2) in detail].
There is no mention in any of the conditions in Section 16(2), that for
a recipient who has availed ITC, reversal has to be done in case
later on the GST rate on availed ITC is reduced. Also, the emphasis
is to be provided on the intent to use the same in furtherance of
business at the time of availment of such ITC and hence the
question of reversal does not arise at all.
Q272. Whether pure agent is eligible for taking ITC when he has
incurred some expense and recovered such expense from the
recipient of supply excluding GST (i.e. only taxable value of
expenses incurred as pure agent will be recovered)?
Ans. Input tax has been defined under section 2(62) of the CGST Act as
under:
“(62) “input tax” in relation to a registered person, means the
central tax, State tax, integrated tax or Union territory tax charged on
any supply of goods or services or both made to him and includes —
(a) the integrated goods and services tax charged on import of
goods;
(b) the tax payable under the provisions of sub-sections (3) and (4)
of section 9;
(c) the tax payable under the provisions of sub-sections (3) and (4)
of section 5 of the Integrated Goods and Services Tax Act;
(d) the tax payable under the provisions of sub-sections (3) and (4)
of section 9 of the respective State Goods and Services Tax
Act; or

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Practical FAQ’s under GST

(e) the tax payable under the provisions of sub-sections (3) and (4)
of section 7 of the Union Territory Goods and Services Tax Act,”
but does not include the tax paid under the composition levy;”
Only goods and services are supplied to him and thus, he is the
person who is the recipient of such goods and services which
entitles him to the credit of tax paid on such goods and services as
credit. In case the supply of such goods and services is not made to
him, he is not the person entitled to the tax paid on such goods and
services as ITC. The supply of goods and services in case of pure
agent is not made to him but his principal and such pure agent
merely makes the payment on behalf of the recipient and thus, is
eligible to claim such amount from the recipient as reimbursement.
Explanation to Rule 33 of CGST Rules, explains the concept of pure
agent. [Please Refer Q184 for Rule 33]
Under the concept of pure agent, the agent receives supplies of
goods and services on behalf of the recipient of supply. Thus, he
does not receive goods or services in his own capacity. Further,
invoice will be issued by the supplier in the name of the recipient
and not in the name of the agent.
Further, Section 16 of the CGST Act specifies the eligibility
and conditions for availment of ITC. [Please refer Q No.270 for
Section 16(2)]
As per section 16(2) of the CGST Act, possession of tax invoice and
receipt of goods or service are the essential conditions to avail ITC
by the taxpayer. The agent is not in possession (custody does not
mean possession) of invoice. The difference between custody and
possession is that a possessor has complete dominion over the
property while a custodian merely has the duty of care or
supervision over the property. Thus, he is not the possessor of such
invoice. Also, he cannot be said to have received goods or services
as no supplies are made to him. Hence ITC would not be available
to him.
Hence, the person acting as pure agent should recover the full
amount of expense from the recipient including the value of GST.
The recipient will be eligible to take ITC as per section 16.

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Q273. How to treat following transactions:

(i) Supply / delivery shortages in transit.
(ii) Customer gets less quantity than invoiced and also pays
less based on actual receipt.
In case of shortage of receipt quantity than invoiced quantity,
whether ITC should be taken in proportion to the quantity
received?
Ans. In case of supply shortages, unilaterally the recipient should not
account for the ITC. Such shortages in quantity are to be reconciled
with the supplier and it is advisable that the supplier may issue
credit note to the customers based on actual supplies.
If the value of the invoice is not to be changed, then the recipient
should recognize the normal and abnormal loss in transit. Any
acceptable or normal loss in transit as per the industry norms may
not entail reversal of ITC. Excess shortage of receipt of quantity may
require blockage of ITC under section 17(5) of the CGST Act.
Q274. What are the criteria for availing ITC in case of goods received
in lots or in installments?
Ans. As per first proviso to section 16(2) of the CGST Act, in case goods
covered under an invoice are not received in a single consignment
but is received in lots/ installments, ITC can be claimed only upon
receipt of the last lot/ installment.
Q275. A supplier has shown sales as B2C. Is the recipient eligible to
claim ITC, if he possesses tax invoice?
Ans. Possessing tax invoice alone is not enough to be eligible to claim
ITC, even assuming that it is a bona fide transaction for receipt of
goods or service and that the recipient’s GSTIN is correctly
mentioned therein.
One of the requirements to be eligible to claim ITC, as provided
under section 16(2) of the CGST Act, is that the tax charged in
respect of such supply has been actually paid by the supplier to the
Government, either in cash or by utilization of ITC. In terms of
section 37 of the CGST Act and Rule 59 of the GGST Rules, the
supplier is required to furnish details of his outward supplies in

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Form GSTR-1, inter alia, invoice wise details of supplies to

registered persons, including taxable value and tax, and in particular
GSTIN of the recipient.
These details in turn are available to the recipient in Part A of
Form GSTR-2A to confirm that ITC claimed by him and the
supplier’s declaration are in line.
Where, if the supplier has shown sales as B2C, no details of his
outward supply would be updated by him with recipient GSTIN.
Consequently, no information on how the supplier has shown the
transaction in his outward supplies will be available with the
recipient in Form GSTR-2A to match the same with the ITC taken by
him.
The recipient will thus fail to show that the ITC claimed by him meets
the aforesaid requirement under section 16(2); the tax charged has
been paid by the supplier to the Government as he cannot co-relate
the ITC with supplier’s outward details. This will jeopardize his claim
for credit.
Incidentally, the practical way out in such a situation to protect ITC
would be to take up with the supplier and request him to amend the
details of outward supply by including this transaction in B2B Table
and amending it from B2C to B2B. However, this needs to be done
within the timeline of section 16(4) of the CGST Act, for taking
credit.
Q276. How to take input credit in third party transfer directly by the
supplier instead of routing through the original purchaser for
operational conveniences. When the original purchaser does
not want to disclose the purchase price to the third party, is it
possible?
Ans. As per section 16(2) of the CGST Act, one of the conditions to avail
ITC is that the recipient of supply should have received the goods or
services or both.
In terms of the explanation below section 16(2) (b) of the CGST Act
it shall be deemed that the registered person has received the goods
or services–

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(i) where the goods are delivered by the supplier to a recipient or

any other person on the direction of such registered person,
whether acting as an agent or otherwise, before or during
movement of goods, either by way of transfer of documents of
title to goods or otherwise;
(ii) where the services are provided by the supplier to any person
on the direction of and on account of such registered person.
Hence, in case supplies are made directly by the third person
without actually receiving the goods from the original supplier, still
ITC would be available to the said third person.
If the original purchaser does not intend to show the value of
supplies to the third party who actually receives the goods, he may
ask the supplier to issue delivery challan instead of tax invoice, for
such transaction, and e–way bill can also be generated through such
delivery challan.
Another option is the original purchaser may provide ‘Bill from’
address as his own and ‘Ship from’ address as his supplier’s
address in the invoice raised to the final buyer as well as within the
e-way bill. The original purchaser may not hand over the copy of his
purchase invoice either to the transporter or the final buyer.
Q277. If seller does not deposit the GST with the Government then as
per section 16(2) (c) of the CGST Act, the buyer cannot claim
input tax of the same? Is depositing tax amount by the seller a
pre-condition for availing ITC?
Ans. As per section.16(2) of the CGST Act, one of the conditions to claim
ITC is that the tax charged in respect of such supply has been
actually paid to the Government, either in cash or through utilisation
of ITC admissible in respect of the said supply.
Given the current Form GSTR-3B structure wherein the buyer may
not know if the seller has paid the taxes and can prove his bona
fides, then the deposit of taxes may be challenged by such buyer.
From October 2019, Rule 36(4) of the CGST Rules, provides for
restriction of ITC to 120% (reduced to 110% from 1st January 2020)
of the eligible credit being reflected in Form GSTR-2A. There may

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be practical challenges to the accurate implementation of this rule

though.
Q278. Whether 180 days criteria are applicable for whole payment or
only for the payment of GST? Assuming if a recipient had paid
only the GST portion of invoice to the supplier and not the
entire payment whether the recipient can take entire ITC as tax
value has been paid by him?
Ans. As per second proviso of Section 16(2) of the CGST Act, when the
recipient fails to pay to the supplier of goods or services or both, the
amount towards the value of supply along with tax payable thereon
within a period of 180 days from the date of issue of invoice by the
supplier, an amount equal to the ITC availed by the recipient shall
be added to his output tax liability, along with interest thereon.
Note: The above restriction shall not apply to supplies on which tax
is payable on reverse charge basis by the recipient.
Also, the recipient shall be entitled to avail of the credit of input tax
on payment made by him of the amount towards the value of supply
of goods or services or both along with tax payable thereon.
The question under consideration is, if the recipient pays only the
tax value to the supplier, whether he is eligible for the ITC or not.
Since the payment requirement as stipulated above is towards the
value of supply along with tax payable, payment of Tax component
and availment of the same as ITC is not permissible. Also, when part
payment is made towards the value of supply, proportionate credit
towards the value of supply paid shall be eligible for ITC as per
Rule 37 of the CGST Rules.
In case if the payment is not made within 180 days the ITC claimed
by the supplier need to be reversed along with Interest from the date
of taking the credit till the date of payment or reversal along with
Interest as per Section 50(1) of the CGST Act. In case if the
payment to supplier is made after reversal of ITC at a later date, the
supplier is eligible to re-claim the credit.
Q279. Can ITC be claimed by the recipient, when both the supplier and
recipient agree in writing that the value of supply shall be made
after 180 days based on a contract?

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Ans. As per second proviso to section 16(2) of the CGST Act, the
registered person must pay the supplier the value of goods along
with tax amount within 180 days from the date of invoice. In case of
failure to do so, corresponding credit availed by the registered
person will be added to his output tax liability along with interest of
18 % (from the date of availing credit to the date on which the
amount was added to his output liability). However, credit can be
fully availed, once payment is made to the supplier. Hence, even if it
is agreed between the supplier and recipient for payment of value of
supply after 180 days based on contract, ITC shall still not be
available to the recipient for such supply. Having said this, re-
availment of ITC upon making the payment at a later date is without
any time limit.
Q280. Explain the meaning of “receiving of invoice for taking of
credit”. Will the date of invoice be deemed as date of receiving
of invoice or date of actual receipt by mail or by post?
Ans. One of the conditions for taking ITC as per section 16(2) of the
CGST Act, is that the recipient is in possession of a tax invoice or
debit note issued by a registered, or other prescribed tax payer. .
Hence for availment of ITC, the recipient should be in possession of
the same. Actual receipt of invoice which entitles him to such
possession would be the pre-condition for entitlement of ITC.
Q281. In case of non–payment to supplier within 180 days, the
recipient has to reverse the ITC but if the supplier has already
deposited the tax and also provided the proof of deposit of tax,
will the recipient be able to avail the ITC?
Ans. As per the second proviso to section 16(2) of the CGST Act, when
the recipient fails to pay to the supplier of goods or services or both,
the amount towards the value of supply along with tax payable
thereon within a period of 180 days from the date of issue of invoice
by the supplier, an amount equal to the ITC availed by the recipient
shall be added to his output tax liability, along with interest thereon.
Hence, the fact that the supplier paid the tax amount does not
change the above provisions. ITC can be re-availed upon payment
of value of supplies to the supplier.

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Q282. ITC claimed but payment to supplier done after 2 years.

Whether entitled to take ITC after 2 years?
Ans. Payment to supplier is not a condition precedent to be entitled to ITC
nor does the GST Law provide any timeline for payment to supplier.
However, the second proviso to section 16(2) of the CGST Act
provides that where ITC has been availed in respect of any supply
but the recipient fails to pay to the supplier the amount towards the
value of supply along with the tax payable thereon within a period of
180 days from the date of issue of invoice by the supplier, an
amount equal to ITC availed by the recipient shall be liable to be
added by the recipient to his output tax liability, along with interest
thereon, in such manner as may be prescribed.
Further, Rule 37 of the CGST Rules, in effect provides that in such
an eventuality, the amount of ITC proportionate to such amount not
paid to the supplier shall be added to output tax liability of the
recipient for the month immediately following the period of 180 days
from the date of issue of the invoice; besides, the recipient shall be
liable to pay interest as specified in the rule. In nutshell, ITC is
required to be reversed together with interest where the supplier has
not been paid for the supply within 180 days of invoice date.
In the instant case, ITC has been claimed but the supplier was paid
only after two years. In view of the provisions stated above, such
ITC shall be liable to be reversed and paid back after 180 days of
invoice date with interest. Assuming that it has been done, the next
issue to address is whether the recipient can claim ITC after two
years when he pays the supplier.
As per the third proviso to section 16(2) of the CGST Act, the
recipient who has reversed / paid back the amount of ITC as per the
provisions discussed earlier, shall be entitled to re-avail ITC on
payment made by him to the supplier towards the value of supply
along with tax payable thereon. Moreover, as per Rule 37(4) of the
CGST Rules, the timeline specified under section 16(4) for availing
ITC shall not apply to a claim for re-availing of the credit that had
been reversed earlier on account of non–payment to the supplier
within specified period.
Hence, in the instant case, ITC can be re-availed after payment is
made to the supplier after two years.

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Q283. Supplier has uploaded invoice details in Form GSTR-1, but the
recipient is not in possession of the invoice. In such a case
what is the criteria for availing credit?
Ans. One of the conditions for taking ITC as per section 16(2) of the
CGST Act is that the recipient is in possession of a tax invoice or
debit note issued by a registered, or other prescribed tax payer.
Hence for availment of ITC, the recipient should be in possession of
the same.
When the recipient of supply is not in possession of tax invoice or
other valid prescribed documents, ITC cannot be claimed even
though the said invoice appears in his Form GSTR-2A.
Q284. A recipient of supply has reversed the ITC on account of non-
payment of the value of supply to supplier. When subsequently
payment is made towards such supply, is he entitled to
avail the ITC? Is there any time limit prescribed for such
re-availment?
Ans. As per second proviso of section 16(2) of the CGST Act, the
registered person must pay the supplier the value of goods along
with tax amount within 180 days from the date of invoice. Upon the
failure of doing so, corresponding credit availed by the registered
person will be added to his output tax liability along with interest at
the rate of 18 % (from the date of availing credit to the date when
the amount was added to his output liability). However, ITC can be
fully availed, once payment is made to the supplier.
As per Rule 37(4) of CGST Rules, the time limit specified under
section 16(4) of the CGST Act, for normal availment of ITC, shall not
apply to a claim for re-availing of any credit, in accordance with the
provisions of the Act or the provisions of this Chapter that had been
reversed earlier. Hence, there is no specific time limit restriction for
re-availment of reversed ITC.
Q285. Can CGST and State GST paid for hotel stay in one State be
used as ITC for a person registered in another State? Whether,
ITC on CGST portion of such tax paid reflected in the electronic
credit ledger can be availed?

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Ans. As per section 2(62) of the CGST Act ‘Input tax’ in relation to a
registered person, inter alia, means, the CGST, SGST and IGST
charged on any supply of goods or services to the registered person.
CGST and SGST are two components of the GST charged on intra-
State supplies and IGST is the GST charged on inter-State supplies.
Section 49(4) of the CGST Act provides that the amount available in
the electronic credit ledger, as defined under section 2(46) of the
CGST Act, may be used for making such payment towards outward
tax liability. The electronic credit ledger contains the balance of ITC
on inward supplies as per the return of a registered person.
As input tax and its credit are always linked with, the question as to
whether the person is registered or not, the two components of GST
paid on inward intra-State supply in a State, could have been taken
credit of, if only registration is taken in that particular State. The
architecture of the GST Act is such that even if a person is
registered in different States all such registrants will be treated as
distinct persons, and input tax in the credit ledger of one such
person is not transferable to the credit ledger of another. If the
person is not registered in a particular State, the tax paid on the
inward supplies in that State is not ‘input tax’ in relation to the said
person and hence no ITC shall be allowed in such case.
Q286. With regard to IGST paid on import or tax paid under RCM,
whether ITC is allowed even if the supplier has not provided its
details in Form GSTR-2A, or the restriction stipulated under
Rule 36(4) of the CGST Rules will apply?
Ans. As the above items cannot be reflected in Form GSTR-2A, the
recipient is entitled to take ITC based on the documentary evidence
of payment of tax. Restrictions provided in Rule 36(4) of the CGST
Rules, shall not apply to the above items. This has also been
clarified in Circular No. 123/42/2019-GST dated 11.11.2019
Q287. Whether a dealer can claim ITC in subsequent month even
though the invoice raised by the supplier was in the previous
month? Whether ITC availment can be deferred for subsequent
periods?
Ans. The time limit for availment of ITC as per section 16(4) of the CGST
Act is available upto the due date of furnishing of the return under

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section 39 for the month of September following the end of financial

year to which such invoice or debit note pertains or furnishing of the
relevant annual return, whichever is earlier; the recipient may avail
ITC within the above said time limits. The dealer may avail the ITC
in any of the months preceding this outer time limit.
Q288. Will the ITC remaining unutilised in electronic credit ledger be
available on transfer on account of sale, merger, demerger,
amalgamation, lease or transfer of business per section 18(3) of
the CGST Act? What is the treatment in case of demerger?
Ans. As per section18(3) of the CGST Act, read with Rule 41(1) of the
CGST Rules, a registered person shall, in the event of sale, merger,
de-merger, amalgamation, lease or transfer or change in the
ownership of business for any reason, furnish the details of sale,
merger, demerger, amalgamation, lease or transfer of business, in
FORM GST ITC-02, electronically on the common portal along with
a request for transfer of unutilized ITC lying in his electronic credit
ledger to the transferee.
In case of demerger, the ITC shall be apportioned in the ratio of the
value of assets of the new units as specified in the demerger
scheme. It is worth noting that for the purpose of this sub-rule,
“value of assets” means the value of the entire assets of the
business, whether or not ITC has been availed thereon. Circular
No.133/03/2020-GST dated 23.03.2020 provides further clarification
in such transactions.
Q289. Whether handing over of goods by supplier to transporter
can be assumed as receipt of goods for the purpose of
availing ITC?
Ans. Relevant conditions specified under section 16(2) of the CGST Act,
for availment of ITC are -
• Recipient is in possession of a tax invoice or debit note issued
by a registered supplier,
• Recipient has received the goods or services or both.
It shall be deemed that the registered person has received the
goods where the goods are delivered by the supplier to a recipient

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or any other person on the direction of such registered person,

whether acting as an agent or otherwise, before or during movement
of goods, either by way of transfer of documents of title to goods or
otherwise.
In the given case, when the goods were intended for movement and
the supplier has handed over the same to the transporter, it shall not
be treated as receipt of goods by the recipient and hence does not
satisfy the conditions under section 16(2) of the CGST Act for
availment of ITC.
Q290. We have been exempted from payment of IGST while importing
under EPCG Scheme. Later due to non-fulfillment of export
obligation, we had to pay the duty again (Say after 3 years).
How to take ITC of IGST paid after 3 years from invoice date.
Ans. In such cases, the mechanism of payment is through TR-6 challan.
Even though not specified as a relevant document specifically, it
may be regarded as ‘any similar document issued under the
Customs Act, 1962’ for the purpose of availment of ITC. Further, the
pre-condition of payment of tax arises during the year.
[Section 16(2) (c) of the CGST Act] One may argue that the ITC
arises in the year of payment and the outer time limit of section
16(4) of the CGST Act would arise accordingly.
Q291. Is the restriction provided in Rule 36(4) of the CGST Rule, be
calculated supplier wise or on consolidated basis?
Ans. The restriction imposed under Rule 36(4) of the CGST Rule, is not
supplier wise. The credit available under Rule 36(4) is linked to total
eligible credit from all suppliers against all supplies whose details
have been uploaded by the suppliers.
Further, the calculation would be based only on those invoices which
are otherwise eligible for ITC. Accordingly, those invoices on
which ITC is not available under any of the provisions (say under
sub-section (5) of section 17 of the CGST Act) would not be
considered for calculating revised 10% of the eligible credit
available.
The above has also been clarified vide Circular no. 123/42/2019-
CGST dated 11.11.2019.

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Q292. Explain Rule 86A of the CGST Rules relating to conditions of

use of amount available in the electronic credit ledger?
Ans. Rule 86A of the CGST Rules is as follows:
“86A. Conditions of use of amount available in electronic credit
ledger.
(1) The Commissioner or an officer authorised by him in this
behalf, not below the rank of an Assistant Commissioner,
having reasons to believe that credit of input tax available in
the electronic credit ledger has been fraudulently availed or
is ineligible in as much as –
(a) the credit of input tax has been availed on the strength
of tax invoices or debit notes or any other document
prescribed under rule 36 -
(i) issued by a registered person who has been found
non-existent or not to be conducting any business
from any place for which registration has been
obtained; or
(ii) without receipt of goods or services or both; or
(b) the credit of input tax has been availed on the
strength of tax invoices or debit notes or any other
document prescribed under rule 36 in respect of
any supply, the tax charged in respect of which has
not been paid to the Government; or
(c) the registered person availing the credit of input tax has
been found non-existent or not to be conducting any
business from any place for which registration has been
obtained; or
(d) the registered person availing any credit of input tax is
not in possession of a tax invoice or debit note or any
other document prescribed under rule 36,
may, for reasons to be recorded in writing, not allow debit of
an amount equivalent to such credit in electronic credit
ledger for discharge of any liability under section 49 or for
claim of any refund of any unutilised amount.

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(2) The Commissioner, or the officer authorised by him under

sub-rule (1) may, upon being satisfied that conditions for
disallowing debit of electronic credit ledger as above, no longer
exist, allow such debit.
(3) Such restriction shall cease to have effect after the expiry of a
period of one year from the date of imposing such restriction.”
Rule 86A has been inserted vide Notification No. 75/2019 – Central
Tax dated 26.12.2019. This Notification has been issued by the
Government in exercise of the powers conferred by section 164 of
the CGST Act, to make rules, on the recommendations of GST
Council, for carrying out the provisions of the Act. It is pertinent to
note that the GST Council in its 38th Meeting held on 18.12.2019 had
recommended “to check the menace of fake invoices, suitable action
to be taken for blocking of fraudulently availed input tax credit in
certain situations” and subject rule is one of the provisions brought
in to give effect to this recommendation of the Council. Thus,
Rule 86A, is not any procedural rule concerning ITC but it is an anti-
evasion measure to control misuse of ITC by authorising the tax
authorities to block ITC for the time being under the specified
circumstances. It may also be noted that whereas the authority
acting under the provisions of this rule is required to record in writing
the reasons for the same, the concept of notice and show cause has
been done away with.
An analysis of the Rule shows that it provides for two-fold action:
(a) Action against fraudulent credit by those who involve into
invoice trading without goods or services or those who avail
credit fraudulently. The provisions under clause (a), (c) and (d)
of sub-rule (1) deal with such situations. Genuine taxpayers and
professionals have no issue on this part as it concerns
fraudulent credit.
(b) Action against ineligible credit contemplated under clause (b) of
sub-rule (1), in cases of non-payment of tax in respect of which
ITC has been availed (this clause has been highlighted in the
provisions of Rule 86A of the CGST Rules reproduced earlier).
This provision in the rule is discussed below in greater details
as it has implications for genuine taxpayers.

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In the context of ITC, there can be two situations of non-payment of

tax- either invoices are not uploaded by the supplier, or the invoices
are uploaded but payment and return have not been made/
uploaded by him. In either of these situations, the aforesaid
provisions of Rule 86A, in respect of ineligible credit cannot be
faulted in as much as it is in consonance with one of the conditions
under section 16(2) (c) of the CGST Act, for eligibility of ITC that tax
charged in respect of supply (of which ITC is availed) has been
actually paid to the Government.
However, there are other issues as well in having such a provision in
the statute book. First, in a tax system working on forward collection
basis, responsibility lies on the supplier to pay on time the taxes
collected. The recipient pays the supplier including taxes under
contractual terms which the supplier is to pay to Government on
time.
Secondly, there are procedural restrictions on availing ITC which the
recipient must comply like Rule 36(4) of the CGST Rules, which
limits credit of invoices not uploaded to 10% of eligible credit
uploaded by suppliers.
Thirdly, there are ample powers with the Government to deal with
errant suppliers for ensuring compliance and recovery. Therefore,
from compliance perspective to punish a recipient for default of
supplier may not be a fair proposition.
In fact, Government authorities would find it easier to block credit
rather than pursuing the supplier for payment. Moreover, when the
recipient has followed the process of law, in a value added tax
system like GST, whether credit of tax on inputs or input services is
a vested right of recipient and can the same be diluted, itself is a
contentious issue. Further, as mentioned earlier, in rule 86A of the
CGST Rules, even the concept of notice and showing cause has
been done away with. All this makes this part of the rule concerning
ineligible credit, as contained in clause (b) of sub-rule (1), a matter
of concern for taxpayers and a contentious issue going ahead.
Q293. Whether scanned copy of invoice received through email can be
treated as original invoice for the purpose of section 31 of the
CGST Act?

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Ans. Rule 36 of the CGST Rules, prescribes the documents for claim of ITC
by a registered person. Rule 36(1) of the CGST Rules mandates ‘an
invoice issued by the supplier of goods or services or both in
accordance with the provisions of section 31;’ as one of the documents
available for availing ITC. As per section 31 of the CGST Act, read with
Rule 46 of the CGST Rules, tax Invoice for goods shall be prepared in
triplicate and for services in duplicate.
There is no mandatory condition in Rule 36 stating which copy of the
invoice should be used for availing ITC. Hence any of the copies viz.,
Original, Duplicate or Triplicate as the case may be, shall be used for
availing ITC. But use of a photocopy or scanned copy is not in line with
the expectation of Rule 36 and hence should not be treated either as
original invoice or eligible document for availing ITC.
Q294. Can you please clarify if ITC on airfare is allowed as credit if
used for business travel?
Ans. This doubt arises because of the disallowance under
section 17(5)(b) (iii) of the CGST Act, which provides that ITC shall
not be available in respect of ‘travel benefit’s extended to employees
on vacation such as leave or home travel concession’. However, it is
pertinent to note here that the restriction is applicable only if the
airfare pertains to employees travelling for vacation or leave
(personal use). If the employee/director makes any travel for
business purposes there is no restriction under section 17(5) of the
CGST Act and ITC is fully allowed provided all conditions under
section 16 of the CGST Act are satisfied.
Q295. Can a company take credit of a motor vehicle with a seating
capacity of more than 13 used for transportation of employees?
Ans. From 01-02-2019 section 17(5)(a) of the CGST Act, provides that
ITC shall be disallowed on motor vehicles for transportation of
persons having approved seating capacity of not more than thirteen
persons (including the driver). Hence ITC on motor vehicle with
seating capacity of more than 13 is allowed if it is used in the course
or furtherance of business including use for transportation of
employees. However, prior to 01-02-2019, ITC was not allowable.

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Q296. Whether gold coins distributed to customers as sales

promotion is eligible for credit?
Ans. As per section 17(5) (h) of the CGST Act, ITC is disallowed on
‘goods lost, stolen, destroyed, written off or disposed of by way of
gift or free samples’. It is a general view that gold coins distributed
to customers as sales promotion should be disallowed under section
17(5) (h) of the CGST Act.
Q297. Whether ITC on insurance on motor vehicle used for
transportation of goods available?
Ans. The restriction placed by section 17(5) of the CGST Act, shall apply
only in the case of motor vehicles for transportation of persons
having approved seating capacity of not more than thirteen persons
(including the driver). There is no restriction with regard to ITC on
motor vehicles used for transportation of goods. Further, ITC on all
expenses including insurance expenditure would be allowable under
the law.
Q298. We are association of person (AOP) registered under GST. We
conduct social gathering functions for our members and charge
fees for the same and collect GST. We provide lunch or dinner
to our members during those gatherings. Whether GST paid on
catering services provided for these functions can be claimed
as eligible ITC ?
Ans. As per section 17(5) (b) of the CGST Act, ITC shall not be available
in respect of food and beverages, outdoor catering, beauty
treatment, health services, cosmetic and plastic surgery, leasing,
renting or hiring of motor vehicles, vessels or aircraft referred to in
clause (a) or clause (aa) except when used for the purposes
specified therein, life insurance and health insurance.
It may be noted that ITC in respect of such goods or services or both
shall be available where an inward supply of such goods or services
or both is used by a registered person for making an outward
taxable supply of the same category of goods or services or both or
as an element of a taxable composite or mixed supply.
In the given case, the registered AOP is not eligible for availment of
ITC on account of payment made to catering supplies.

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Q299. A retailer has booked an under-construction commercial shop

in same city say Vashi in Navi Mumbai as his branch and he has
paid GST while purchasing commercial shop. Can he claim ITC
of GST paid on purchase of shop, to be utilized against his
regular output liability?
Ans. Section 17(5) (d) of the CGST Act, specifically places a restriction
for availment of ITC with respect to construction of an immovable
property including when such property is used in the course or
furtherance of business. It reads :
“(d) goods or services or both received by a taxable person for
construction of an immovable property (other than plant or
machinery) on his own account including when such goods or
services or both are used in the course or furtherance of business
Explanation.-For the purposes of clauses (c) and (d), the
expression “construction” includes re-construction, renovation,
additions or alterations or repairs, to the extent of capitalisation, to
the said immovable property;”
Further, as per Schedule II of the CGST Act read with NN 11/2017-
CTR, sale of under-construction unit is deemed construction service.
Therefore the retailer is not eligible for availment of ITC on purchase
of shop.
Q300. Discuss "Buy One, Get One Free", with respect to
section 17(5) (h) of the CGST Act.
Ans. Section 17(5) (h) of the CGST Act, specifically restricts credit with
respect to goods disposed of by way of ‘gift’ or ‘free samples’. It may
appear at first glance that in case of offers like "buy one, get one
free", one item is being supplied free of cost without any
consideration, and thus may qualify as gift.
However, as per the commonly understood definition of ‘gift’, it is
something given graciously, without any consideration whatsoever in
return. In case of “buy one, get one free”, the price of the item given
free is actually included in the price of the first item. Thus, it can be
said that restriction under section 17(5) of the CGST Act, does not
apply to such offers.

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Q301. ‘A’ owns a pharmacy. If A gives a gift to its customers upon a

specific purchase, which gift is not related to medicine, then
what is the legal position of ITC on such goods given free?
Ans. The principle outlined in the answer to question no. 300 will apply,
irrespective of whether the item given free is related or otherwise.
Hence, ITC will be available.
Q302. Stocks written-off being old or non-moving, is ITC needed to be
reversed? Is reversal required even in case such stock is still
held physical stock of the registered person?
Ans. Yes. Section 17(5) (h) of the CGST Act, provides that ITC shall not
be available in respect of goods lost, stolen, destroyed, written off or
disposed of by way of gift or free samples. Thus, ITC is to be
reversed on stock which is written-off. However, one can take a
legal position that the above restriction may not apply in case stock
is only partially written-off.
The aforesaid reversal of credit is true irrespective of whether the
stock is physically held by the registered taxpayer even after
writing-off.
Q303. If assets are written-off without any sale value, what are the
GST implications?
• Scenario 1-Original asset purchased during pre-GST era
• Scenario 2-Original asset purchased during GST era.
Ans. Following are the possible solutions for the given scenarios;
Scenario I: Original Asset purchased during pre-GST era;
Since asset is purchased in pre-GST era, there is no ITC and
technically there shall be no GST impact. Refer definition of ITC
under GST regime.
Scenario II: Original Asset purchased during GST era;
There shall be reversal of input tax liability pursuant to
section 17(5) (h) read with section 18(6) of the CGST Act. Once ITC
is reversed, Schedule - I may not be applicable.

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Following are the relevant provisions (relevant extract);

Section 2 (63) of CGST Act: “input tax credit” means the credit
of input tax.
Section 2(62) of CGST Act: “input tax” in relation to a registered
person, means the central tax, State tax, integrated tax or Union
territory tax charged on any supply of goods or services or both
made to him and includes—
(a) the integrated goods and services tax charged on import of
goods;
(b) the tax payable under the provisions of sub-sections (3) and
(4) of section 9;
(c) the tax payable under the provisions of sub-sections (3) and
(4) of section 5 of the Integrated Goods and Services Tax
Act;
…..”
Section 17(5) of CGST Act: Notwithstanding anything contained
in sub-section (1) of section 16 and sub-section (1) of section 18,
input tax credit shall not be available in respect of the following,
namely:—
(a) ……………
……..
(h) Goods lost, stolen, destroyed, written off or disposed of by
way of gift or free samples.
Section 18(6) of the CGST Act :
(6) In case of supply of capital goods or plant and machinery, on
which input tax credit has been taken, the registered person
shall pay an amount equal to the input tax credit taken on the
said capital goods or plant and machinery reduced by such
percentage points as may be prescribed or the tax on the
transaction value of such capital goods or plant and
machinery determined under section 15, whichever is higher:
Provided that where refractory bricks, moulds and dies, jigs
and fixtures are supplied as scrap, the taxable person may
pay tax on the transaction value of such goods determined
under section 15.

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Schedule I CGST Act, Activities to be treated as Supply even

if made without consideration
“Para 1: Permanent transfer or disposal of business assets
where input tax credit has been availed on such assets.”
Schedule II CGST Act, Activities to be treated as Supply of
Goods or Supply of Services
“Para 4: Transfer of business assets;
(a) Where goods forming part of the assets of a business
are transferred or disposed of by or under the directions
of the person carrying on the business so as no longer
to form part of those assets, whether or not for a
consideration, such transfer or disposal is a supply of
goods by the person;
(b) Where, by or under the direction of a person carrying on
a business, goods held or used for the purposes of the
business are put to any private use or are used, or made
available to any person for use, for any purpose other
than a purpose of the business, whether or not for a
consideration, the usage or making available of such
goods is a supply of services;
(c) Where any person ceases to be a taxable person, any
goods forming part of the assets of any business carried
on by him shall be deemed to be supplied by him in the
course or furtherance of his business immediately before
he ceases to be a taxable person, unless –
(i) The business is transferred as a going concern to
another person; or
(ii) The business is carried on by a personal
representative who is deemed to be a taxable
person.

Q304. A registered person fails to claim GST input in FY 2018-19,

though it was reflected in the audited financial statement. This
was further pointed out in Form GSTR 9C by the Auditor, after
the due date of filing of GST Return Form 3B of the month of
September, 2019. Can the registered person claim this ITC?
Ans. As per section 16(4) of the CGST Act, the ITC for the FY 2018-19
can be claimed only upto the due date of filing of return for the

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month of September of the succeeding financial year. In the present

case, the registered dealer will not be able to claim the ITC, since it
has not been claimed within the due date of return for the month of
September – 2019. Further, the ITC not claimed within eligible time
will lapse and the GST Auditor may disclose the same accordingly in
the Form GSTR – 9C.
Q305. Whether ITC is required to be reversed against non-supply
income?
Ans. The transactions listed in Schedule III of the CGST Act are “not
supplies” and hence they are neither ‘exempt supplies’ nor are they
‘non – taxable supplies’. The explanation added to section 17(3) of
the CGST Act, [vide The Central Goods and Services Tax
(Amendment) Act, 2018 w.e.f. 01-02-2019], provides that no ITC is
required to be reversed for Schedule III supplies except Entry No. 5
of the said Schedule i.e., in respect of land and completed building.
Hence ITC is not required to be reversed for non-supply income
except in case of land and completed building.
Q306. A builder, who is engaged in construction services, is allowed
one-third deduction on the value of flat towards the value
of land; because of this deduction are they required to
reverse ITC?
Ans. As per section 17(2) of the CGST Act, the need for reversal would
be applicable if the supplier is engaged in both taxable and
exempted supplies. In this case, the said deduction is as part of
determination of value and will not be considered as an exempted
supply. Hence, reversal of ITC is not warranted. However, when the
undivided share of land (UDS) is sold and the said value is
accounted in the books, ITC reversal needs to be done as per
explanation provided in Rule 42 of the CGST Rules.
Q307. An exporter of goods receives duty drawback or export
incentive as duty credit scrips, which are subsequently sold by
the supplier to others. He has availed ITC on purchase of
goods, telephone bill, consultancy services, audit fees on
goods which as exported. How to calculate and what service to
be considered for reversal?

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Ans. Duty drawback is not a supply; however sale of duty credit scrips is
exempted goods. If the supplier is engaged in supply of both taxable
and exempted goods, then as per section 17(2) of the CGST Act,
the need for reversal would arise. The reversal of ITC will depend
upon the ratio of taxable and exempted services applied on the
common credit arrived as per Rule 42 of the CGST Rules.
Q308. Whether ITC is available on destroying the perishable goods
like ice cream on its expiry date as per instruction of supplier
as a matter of ethical trade practice?
Ans. As per section 17(5) (h) in case of goods lost, stolen, destroyed,
written off or disposed off by way of gift or free samples, ITC need to
be reversed. In the instant case, ice creams are destroyed due to its
expiry and as per instruction of supplier as a matter of ethical trade
practice; ITC available on such supplies needs to be reversed.
Q309. ABC a registered person has installed a plant and machinery,
which will be used for providing testing services. This plant and
machinery are attached to land using concrete mixture. As per
clarification received from client this machinery can be moved
and fitted anywhere. My question is whether we can take credit
of ITC on materials and services used for construction of this
plant and machinery?
Ans. Section 17(5) of the CGST Act, is an overriding section, restricting
the ITC on inward supplies by way of defining blocked credits.
section 17(5) (c) and section 17(5) (d) of the CGST Act, blocks the
credit of tax paid on purchase of goods, services or works contract
used for construction of immovable property other than Plant and
Machinery. Further, the explanation to section 17(6) of the CGST
Act defines “Plant and Machinery” to mean apparatus, equipment,
and machinery fixed to earth by foundation or structural support that
are used for making outward supply of goods and services or both
and includes such foundation and structural supports but excludes –
(i) land, building or any other civil structures; (ii) telecommunication
towers; and (iii) pipelines laid outside the factory premises.
Hence, it can be inferred that ABC is eligible to take ITC on
materials and services used for construction of this plant and
machinery.

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Q310. In respect of an NBFC or a Bank that has opted to avail 50% ITC
as per section 17(4) of the CGST Act, whether the NBFC/bank
can avail full ITC of tax paid under RCM or only 50% can be
availed? Further, how the ITC on fixed assets shall be availed?
Ans. As per section 17(4) of the CGST Act, a banking company or NBFC
which has opted for this method, their eligible ITC taken or availed
on input, input services and capital goods in excess of 50% shall
lapse. Hence, the NBFC or Bank has to reverse ITC on all input
services on which they have claimed ITC where taxes were paid
under forward charge mechanism or RCM including capital goods.
Q311. A supplier is supplying goods or services to SEZ unit, under the
cover of LUT without payment of IGST. Instead of taking refund
of ITC paid by the supplier on his purchase, which are used for
supplies to SEZ unit, can the supplier use such ITC claimed on
purchase to offset tax in respect of outward taxable supplies
other than SEZ supply?
Ans. Yes, the supplier of goods or services to SEZ unit without payment
of tax, can use his accumulated ITC on inward supplies which are
used for SEZ outward supplies, towards set-off of tax payable on
outward supplied of goods or services made to other than SEZ units.
Any ITC available in his electronic credit ledger in excess after such
adjustment will be available for claiming refund.
Q312. A Supplier exported goods worth of ` 5 Crore and on such
export he was entitled for a MEIS Scrip. Such scrip was
subsequently sold by the supplier for a value of ` 10 Lacs,
which is exempted from levy of GST. Is the exporter required to
reverse ITC proportionately on all purchase or only on common
expense like professional fee, expense on which ITC was
claimed?
Ans. Sale of duty credit scrips are exempted as per the GST Law. As per
section 17(2) of the CGST Act, the need for reversal would arise if
the supplier is engaged in both taxable and exempted supplies. In
this case, the reversal of ITC will be calculated as per Rule 42 of the
CGST Rules.
As per the said rule, the ITC to be reversed proportionately will be
based on inputs or input services, which are commonly used for both

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taxable and exempted supplies. Hence, ITC will be proportionately

reversed on common expenses only.
Q313. Do we need to reverse the credit of the GST on goods which are
used for free supply under warranty period?
Ans. Certain kinds of goods are sold which require the manufacturers to
provide a period-based warranty, wherein if the goods face any
issue the manufacturer repairs the same at his own cost which may
involve replacement of spares. Classic case which can be taken as
an example here would be a motor car.
If car having 2 years warranty sold by an authorised dealer faces a
malfunction within the first 2 years, the customer has the right to get
it repaired free of cost. Sale price of the car includes the cost of
warranty as well. Dealer repairs the car and replaces say ` 1 lakh
worth of spares and raises the invoice for these spares to the
manufacturer who bears the cost. Spares so replaced are provided
to the customer free of cost because at the time of purchase, the car
came with 2 years of warranty.
From the standpoint of the dealer, whatever spares are replaced by
him he had purchased those from the manufacturer and on behalf of
the manufacturer has supplied it to the customer for a consideration
and hence the question of reversal of its ITC does not arise. As far
as the manufacturer is concerned, promise of warranty was sold to
the customer along with the car and therefore the sale price of the
car included warranty as well on which GST has been borne.
All conditions prescribed in section 16 of the CGST Act, are fulfilled
by the manufacturer and hence the question of reversal of ITC does
not arise.
Further, section 17 (5) (h) of the CGST Act, provides that ITC will
not be allowed if goods are:
a. Lost
b. Stolen
c. Destroyed
d. Written off or

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e. Disposed of by way of
(i) Gift or
(ii) Free Samples
Goods supplied under warranty are not covered under any of the
situations outlined in the above section.
Lastly, in the FAQs issued by the CBIC on IT and ITES, the
Government has clarified issues relating to warranty supply as
under:
“Question 20: What would be the tax liability on replacement
of parts (no consideration is charged from a customer) under a
warranty and whether the supplier is required to reverse the
ITC?
Answer: As parts are provided to the customer without a
consideration under warranty, no GST is chargeable on such
replacement. The value of supply made earlier includes the
charges to be incurred during the warranty period.
Therefore, the supplier who has undertaken the warranty
replacement is not required to reverse the input tax credit
on the parts/components replaced.
Question 21: An Original Equipment Manufacturer (OEM) has
an obligation to provide repair services to their customers in the
warranty period. This activity is outsourced by OEM to ‘D’, who
bills the OEM for the services he provides to the customer.
What is the tax liability of ‘D’?
Answer: ‘D’ is providing service to the OEM. GST is payable
on the value of any supplies made by ‘D’ to OEM i.e. in respect
of bills raised by ‘D’ on the OEM.”
In view of the above, the supplier is not required to reverse the
credit of goods which are used for free supply under warranty
period.
Q314. An individual and his spouse are carrying on distribution
business for few years. Both are registered dealers under GST.
Now they formed a partnership firm and decide to carry on their
respective businesses together. Can their respective input
credits be transferred to the new firm?

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 Input Tax Credit

Ans. As per section 18 (3) of the CGST Act, “Where there is a change in
the constitution of a registered person on account of sale, merger,
demerger, amalgamation, lease or transfer of the business with the
specific provisions for transfer of liabilities, the said registered
person shall be allowed to transfer the input tax credit which remains
unutilised in his electronic credit ledger to such sold, merged,
demerged, amalgamated, leased or transferred business in such
manner as may be prescribed.”
In the instant case if the partnership firm succeeded the
proprietorship firm in any of the above- mentioned methods, then the
ITC accumulated in the hands of proprietorship firm, can be
transferred.
Q315. IGST was paid on imported capital goods during the period
between 01.07.2017 to 31.08.2017, which was otherwise "not
payable" after a Notification was issued in respect of advanced
authorisation license holders. How to treat the same in the
books of accounts of the supplier if the goods are subsequently
exempted? Can ITC be claimed fully in one go or does Rule 43
applies?
Ans. Where any person has imported capital goods upon payment of
IGST, they are eligible to claim ITC immediately on receipt of
machinery into their place of business. Yes, as the entire ITC paid
will be eligible for credit immediately, entry can be made in the
books of accounts. If the imported goods are subsequently used for
manufacture of exempted goods, ITC on such capital goods has to
be reversed as per Rule 43 of the CGST Rules.
Q316. What will be the treatment of ITC credit as on appointed date of
registered person or un-registered person in the first return
under section 40 of the CGST Act?
Ans. As per section 18(1) (a) of the CGST Act, “a person who has applied
for registration under this Act within thirty days from the date on
which he becomes liable to registration and has been granted such
registration shall be entitled to take credit of input tax in respect of
inputs held in stock and inputs contained in semi-finished or finished
goods held in stock on the day immediately preceding the date from
which he becomes liable to pay tax under the provisions of this Act;”.
Hence, the registered person can claim such credit in his first return.

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Q317. Outdoor catering service is availed by us for serving food to

our employees. Whether we are eligible to take ITC since we are
paying tax on supply of food to employee?
Ans. Yes, set off is available as per proviso to section 17(5) (b) of the
CGST Act, where outward supply falls in the same category of
goods or services or both or as an element of a taxable composite or
mixed supply.
Q318. Is second proviso to section 17(5) (b) applicable on sub-clause
(i) of the said section?
Ans. No. Sub-clause (iii) ends with words similar to sub-clause (i) and
hence the proviso is applicable only to sub-clause (iii) and not to all
three sub-clauses. Also, the intent of the proviso is such that it is
applicable only to sub-clause (iii) i.e., section 17(5) (b) (iii) of the
CGST Act.
Q319. Is sale of vehicle used for carrying goods sold whose WDV is
higher than sale value counts in exempt supply?
Ans. Sale of vehicle is a taxable supply; however by virtue of NN 8/2018-
CTR, value of the said supply is the value that represents margin of
the supplier, which is deemed to be zero in case the WDV is higher
than the sale value. Hence it is taxable supply with value for taxation
purpose to be zero rupee. However, this notification will apply only if
the registered person has not taken input tax credit.
It is mentioned that the vehicle is used for carrying goods. If the
registered person has claimed ITC, then the taxable amount will be
an amount equal to input tax credit attributable to remaining useful
life or the tax on the transaction value of such capital goods
determined under section 15, whichever is higher.
As per rule 44(6) read with rule 44(1) (b) of the CGST Rules, the
remaining useful life in months shall be computed on pro rata basis,
taking the useful life as five years.
Q320. Is ITC available on Interior decoration service taken for setting
up a new office or the same is blocked by section 17(5) of the
CGST Act?
Ans. Interior decoration services in relation to a new office may involve
many facets like services of interior decoration consultant, services

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of, carpenter electrician, plumber etc. which may be availed from

one agency jointly or may be availed from different agencies
Section 17(5) (c) and (d) of the CGST Act read as under:
“(5) Notwithstanding anything contained in sub-section (1) of
section 16 and sub-section (1) of section 18, input tax credit
shall not be available in respect of the following, namely :—
…….
(c) works contract services when supplied for construction of an
immovable property (other than plant and machinery) except
where it is an input service for further supply of works
contract service;
(d) goods or services or both received by a taxable person for
construction of an immovable property (other than plant or
machinery) on his own account including when such goods
or services or both are used in the course or furtherance of
business.
Explanation. — For the purposes of clauses (c) and (d), the
expression “construction” includes re-construction,
renovation, additions or alterations or repairs, to the extent
of capitalisation, to the said immovable property;
….”
It can be seen from both the above sub-clauses that ITC on
construction is not allowed, if the same pertains to an immovable
property. The term ‘construction’ is defined in an inclusive manner
but interior decoration work is not included therein.
If the interior decoration work results in the creation of movable
property like tables, chairs, curtains, etc. then ITC on the same will
be available as the restriction in these sub-clauses will not apply.
However, if the interior decoration work results in creation of
immovable property then ITC will not be available.
Q321. What is the time limit for availing ITC for F.Y 2018-19?
Ans. Section 16 (4) of the CGST Act reads as under:
“(4) A registered person shall not be entitled to take input tax
credit in respect of any invoice or debit note for supply of goods

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or services or both after the due date of furnishing of the return

under section 39 for the month of September following the end of
financial year to which such invoice or invoice relating to such
debit note pertains or furnishing of the relevant annual return,
whichever is earlier”
In terms of the aforesaid provision, the time limit for taking ITC for
the FY 2018-19 is up to the date of filing of return (Form GSTR-3B)
for the month of September 2019. The due date of filing of Form
GSTR-3B for the month of September, 2019 was 20th of
October, 2019. There is no relaxation given beyond this date.
Note : It is pertinent to mention here that vide The Finance Act,
2020, it is proposed to delink the date of issuance of debit note from
the date of issuance of the underlying invoice for the purposes of
availing ITC, by proposed amendment in Section 16(4) of the CGST
Act. The sub section reads thus:
“(4) A registered person shall not be entitled to take input tax
credit in respect of any invoice or debit note for supply of goods
or services or both after the due date of furnishing of the return
under section 39 for the month of September following the end of
financial year to which such invoice or invoice relating to such
debit note pertains or furnishing of the relevant annual return,
whichever is earlier”.
Q322. An asset no more useful in business is taken over by
businessmen for his personal use in the fourth year. Whether
he will have to reverse ITC on such asset, claimed at the time of
purchase?
Ans. According to section 18(6) of the CGST Act, in the case of supply of
capital goods or plant and machinery, on which ITC has been taken,
the registered person shall pay an amount equal to the ITC taken on
the said capital goods or plant and machinery reduced by such
percentage points as may be prescribed or the tax on the
transaction value of such capital goods or plant and machinery
determined under section 15 of the CGST Act, whichever is higher.
The amount of ITC for the purpose of section 18(6) of the CGST Act
shall be determined in the manner specified in rule 44 of the CGST
Rules. The amount shall be determined separately for ITC of Central
Tax, State Tax, Union Territory Tax and Integrated Tax.

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Further, rule 44 of the CGST Rules provides that the reversal should
be made for such period for which the asset is not used in a period
of 5 years by taking a rate of 5% for each quarter part of the quarter
is to be considered as full quarter.
Example - M/s ABC Ltd., purchased a machine on 01.07.2017, for
` 10,00,000 on which IGST was paid @ 18%. He availed the ITC
and utilised the capital goods. On 02.10.2018 he sold the machinery
as second-hand goods for ` 7,50,000. State what steps he is
required to take to comply with statutory provisions.
Answer – M/s ABC had taken ITC in July 2017 of ` 1,80,000. The
capital goods have been utilised by M/s ABC Ltd. for following
quarters - Year 2017 -2, Year 2018 - 4. Thus, M/s ABC Ltd can keep
ITC @ 5% per quarter i.e.30%. Thus, it can retain ITC of ` 54,000
(30% of ` 1,80,000) and is required to pay amount equal to balance
credit of 70% i.e. ` 1,26,000.
The capital goods were sold for ` 7,50,000. IGST paid on the
transaction value @ 18% is ` 1,35,000.
M/s ABC Ltd. is required to pay an ‘amount’ which is higher of the
above. Thus, they are required to pay IGST of ` 1,35,000. If capital
goods were sold within the State, SGST of ` 67,500 and CGST of
` 67,500 would be payable.
M/s ABC Ltd should prepare tax invoice for this purpose.
Q323. Can a person who has not received payment within 180 days
and deposited GST on invoice issued, claim back GST as input
credit or otherwise.
Ans. There is no such relief mentioned in GST Law for the supplier of
goods/services. However, GST Law has been stringent for the
recipients of goods/services. Second proviso to section 16(2) of the
CGST Act, states:
“Provided further that where a recipient fails to pay to the
supplier of goods or services or both, other than the supplies on
which tax is payable on reverse charge basis, the amount
towards the value of supply along with tax payable thereon
within a period of one hundred and eighty days from the date of
issue of invoice by the supplier, an amount equal to the input tax

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credit availed by the recipient shall be added to his output tax

liability, along with interest thereon, in such manner as may be
prescribed:
Provided also that the recipient shall be entitled to avail of the
credit of input tax on payment made by him of the amount
towards the value of supply of goods or services or both along
with tax payable thereon.”
Thus a supplier of goods/services is not entitled to claim the amount
paid on invoice as ITC in case of delayed payment by the recipient.
Also, for claiming ITC, provisions of section 16 of the CGST Act
have to be followed which provide for invoice, for claiming ITC as
per section 31 of the CGST Act and other conditions, which cannot
be fulfilled by the supplier of goods/services.
Q324. Does it mean that for all suppliers in the country, we have to
check if they have sold land or building or sold securities and
in case of an individual who is a registered supplier, if he buys
and sells securities also outside his business then also 1% of
sale of security is to be treated as value of exempt outward
supply and ITC need to be reversed?
Ans. Normally such details must be verified in order to ensure that ITC
reversal is done meticulously. With regard to an individual, who buys
and sells shares in his personal name for his personal use, or sells
land or building in his personal capacity, the ITC is not eligible and
reversal of ITC is not warranted. However, in case the same is in the
course or furtherance of his business the common ITC used need to
be reversed proportionately by the registered person.
Q325. An export company made a claim for refund of all input services
or inputs used for export of services for Q2 FY 18-19 and the
GST refund was received in cash from Department. GST
Department issued notice citing error in refund that the
company is required to repay the same using input credit
accumulated in Q3 FY 18-19. Advice.
Ans. In case of wrong or erroneous refund of ITC, the same can be
recovered by the Department as per section 73 or 74 of the CGST
Act. The refund granted erroneously may be made good by reversal
of ITC or payment by cash to Government along with interest as per
section 50 of the CGST Act.

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Q326. A company has various segments which include supply of both

exempt and taxable goods. In that case, whether reversal of ITC
will be on segment wise basis or on whole company basis?
Ans. If different segments as mentioned in the question are registered
individually then calculation for reversal should be done on the basis
of segments. However, if single registration is taken by the
company, then the company is left with no option than to prepare the
calculations on whole basis. However, in any case involving different
States, since different GSTIN have to be obtained, the reversal will
have to be done on the basis of GSTINs only.
Q327. A petrol pump dealer is a registered person and he also deals in
lubricants which are taxable under GST. HPCL is charging
license fees and collecting GST on license fees. Whether such
GST on licence fee can be claimed as ITC?
Ans. The license fee paid is in connection with both taxable supply which
is supply of lubricants and exempted supply which is sale of petrol.
Hence as per section 17(2) of the CGST Act, read with rule 42 of the
CGST Rules, the registered person is entitled to claim proportionate
ITC on the said license fee.
Q328. Whether negative value addition permissible in GST or
corresponding portion of negative GST component needs to be
reversed?
Ans. As per provisions of GST Law, there is no need to reverse any ITC
in case of any negative value additions.
Q329. M/s ABC Ltd engaged in leasing business has entered into
contract for construction of building and other amenities such
as lifts, storage tank, firefighting system, chillier etc. There is a
clear mention for billing to be done for each item. Whether ITC
is blocked under section 17(5) of the CGST Act on DG sets, AC,
UPS, exhaust units etc. procured from the same contractor,
considering that these have been received for construction of
immovable property or can ITC be claimed considering them as
plant and machinery?
Ans. Section 17(5) (c) of the CGST Act is restricted to works contract
service supplied for construction of an immovable property. DG

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Sets, AC, UPS should form part of plant and machinery and said
credit is not blocked. However, in the case of centralised air-
conditioning system, the ducts are fastened to the walls and hence
to that extent it can be said that for construction ITC should be
blocked under section 17(5) (c) of the CGST Act.
Q330. Can liability under reverse charge of 2017-18 be paid now, after
raising a self-invoice and then avail as ITC in the year 2020-21?
Ans. There are two important pre-conditions for taking ITC as per
section 16(2):
a) tax should actually be paid to the Government
b) the supplier should be in possession of the tax invoice
The first condition that tax should be paid to the Government is
satisfied only in the current month. Thereby the eligibility to avail the
ITC also arises in the current month. Once this pre-condition is met,
the ITC is allowed to be taken. Therefore ITC belongs to the current
financial year.
The second condition for availing ITC is the possession of tax
invoice. If self-invoice is raised in the current period, then this
condition also gets satisfied only in the current period. Section 16(4)
allows the ITC of invoice of any period upto the due date of
September return of next financial year. Thereby, the time period for
availment of ITC is also not elapsed.
Further press release dated 3rd July 2019 provides the following in
respect of reverse charge:
“Many taxpayers have requested for clarification on the appropriate
column or table in which tax which was to be paid on reverse charge
basis for the FY 2017-18 but was paid during FY 2018-19. It may be
noted that since the payment was made during FY 2018-19, the ITC
on such payment of tax would have been availed in FY 2018-19
only. Therefore, such details will not be declared in the annual return
for the FY 2017-18 and will be declared in the annual return for
FY 2018-19”
The above also signifies that the liability and ITC for reverse charge
belongs to the financial year in which it is paid. Since reverse charge
is paid in the current year, ITC is also available in the current year.

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Reverse charge can be paid in the year 2020-21 and ITC can also
be availed in the same financial year.
Q331. An advance payment towards supply of service by a person
who is located in UAE to an Indian registered entity has been
made in September 2020.The services along with the respective
invoice have been received in the month of November 2020. Can
ITC be claimed in the month of payment of advance itself?
Ans. The eligibility to ITC shall be as per the provisions of Chapter V of
the CGST Act, as amended. Apart from various other conditions, two
very important conditions to be satisfied are the receipt of said
services and possession of a valid tax invoice against the service
received. Being a case of reverse charge requiring the issuance of
self-invoice under section 31(3) (f) of the CGST Act, ITC shall not be
eligible on just payment of an advance amount towards the service.
Therefore, all conditions of the said provisions shall be satisfied in
letter and spirit.
Q332. Can credit on factory shed be taken?
Ans. Section 17(5) of the CGST Act reads as under:
“(5) Notwithstanding anything contained in sub-section (1) of
section 16 and sub-section (1) of section 18, input tax credit shall
not be available in respect of the following, namely :—
……………………
……………
(c) works contract services when supplied for construction of an
immovable property (other than plant and machinery) except
where it is an input service for further supply of works
contract service;
(d) goods or services or both received by a taxable person for
construction of an immovable property (other than plant or
machinery) on his own account including when such goods
or services or both are used in the course or furtherance of
business.
Explanation. — For the purposes of clauses (c) and (d),
the expression “construction” includes re-construction,
renovation, additions or alterations or repairs, to the extent
of capitalisation, to the said immovable property;

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…………….
Explanation. — For the purposes of this Chapter and Chapter VI,
the expression “plant and machinery” means apparatus, equipment,
and machinery fixed to earth by foundation or structural support
that are used for making outward supply of goods or services or
both and includes such foundation and structural supports but
excludes —
(i) land, building or any other civil structures;
(ii) telecommunication towers; and
(iii) pipelines laid outside the factory premises.”
Hence, if the supplies fall under the definition of the “Plant and
Machinery” then credit is available. Otherwise, no credit will be
available.
Q333. A registered dealer records ITC correctly while submitting Form
GSTR-3B every month. However, there are differences in Form
GSTR-2A as one of his suppliers has uploaded invoices under a
different GST No. How can the original dealer recover these ITC
and what is the responsibility of the auditors of such registered
dealers? Whether any interest/penalty provisions will be
applicable?
Ans. If conditions of section 16(2) are satisfied by the dealer, he is
entitled to get the GST credit of the said supply. If it is noticed with
in time, then the said supplier of the dealer can amend the GST
number by Invoice Number of that month Form GSTR-1 filed by him
in the coming month. The Auditor of the dealer has no role on the
suppliers’ Form GSTR-1 but he should find out the reasons for the
shortfall in the ITC in Form GSTR-2A.
Q334. Can ITC be availed on installation of Water Fountain, if such
water fountain is installed at a hotel?
Ans. If the water fountain expense has been grouped under Revenue
Expense in the books of account, then, the ITC relating to the
expense shall be available.
However, if the expense has been capitalised in books of accounts,
then also ITC shall be available.

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Q335. I have not filed my GST returns since 2 nd half year of FY

2019-20. Can I claim ITC credit of those months at the time of
filing the pending returns?
Ans. Section 16 (4) of the CGST Act reads as under:
“(4) A registered person shall not be entitled to take input tax
credit in respect of any invoice or debit note for supply of goods
or services or both after the due date of furnishing of the return
under section 39 for the month of September following the end of
financial year to which such invoice or invoice relating to such
debit note pertains or furnishing of the relevant annual return,
whichever is earlier.”
As per the aforesaid provision, the time limit for taking ITC for the
months of October 2019 to March 2020 is upto the date of filing of
return (Form GSTR-3B) for the month of September 2020. The due
date of filing of Form GSTR-3B for the month of September 2020
was 20th of October 2020.
If the returns for the months of October 2019 to March 2020 are filed
after 20th October 2020 then ITC for that period cannot be availed.

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 Chapter 8
Tax Invoice, Credit and Debit Notes
Q336. A buyer refused to take delivery of goods sent by the supplier
through road transport. At what value the credit note should be
raised for bringing back such goods?
Ans. In terms of section 34(1) of the CGST Act the supplier may issue to
the recipient one or more credit notes for supplies made in a
financial year, each containing such particulars as prescribed in
rule 53(1A) of the CGST Rules, in the following cases:
(a) where one or more tax invoices have been issued for supply
of any goods or services or both and the taxable value or
tax charged in that tax invoice is found to exceed the
taxable value; or
(b) tax payable in respect of such supply, or
(c) where the goods supplied are returned by the recipient, or
(d) where goods or services or both supplied are found to be
deficient.
In the present case, the buyer refuses to take delivery of goods
through road transport which are not covered in above situations.
Section 34(2) of the CGST Act inter alia states: “Any registered
person who issues a credit note in relation to a supply of goods or
services or both shall declare the details of such credit note in the
return for the month during which such credit note has been issued
but not later than September following the end of the financial year
in which such supply was made, or the date of furnishing of the
relevant annual return, whichever is earlier, and the tax liability shall
be adjusted in such manner as may be prescribed:
Provided that no reduction in output tax liability of the supplier shall
be permitted, if the incidence of tax and interest on such supply has
been passed on to any other person.”
In view of the above statutory provision, in the scenarios of material
not having been received inside the premises of recipient and ITC
 Tax Invoice, Credit and Debit Notes

not having been availed for the same, a simple declaration by way of
endorsement as "not received inside the premises and not taken
ITC" on the supplier's original invoice will suffice.
Here, credit note for the entire value may be issued by the supplier
so as to claim reduction of tax liability in the same month or
subsequent month as the case may be.
Q337. (a) Can a supplier issue a credit note where a customer fails to
make the payment after supply?
(b) What would be the impact on the supplier's GST liability?
(c) Can the supplier cancel the invoice where the supply has
not been made, but the invoice has been issued?
Ans. (a) As per section 34, where a tax invoice has been issued for
supply of any goods or services or both and the taxable value or
tax charged in that tax invoice is found to exceed the taxable
value or tax payable in respect of such supply, or where the
goods supplied are returned by the recipient, or where goods or
services or both supplied are found to be deficient, the
registered person, who has supplied such goods or services or
both, may issue to the recipient a credit note containing such
particulars as may be prescribed. Hence, for non-payment of
consideration after supply/ after issuing invoice, credit note
under section 34 of the CGST Act cannot be issued.
(b) Since a credit note cannot be issued by the supplier as
mentioned in (a) above, the tax liability has to be discharged by
the supplier irrespective of whether or not the payment is
received from the recipient.
(c) The GST law does not permit cancellation of invoices. In this
case, the reason for the issuance of invoice has to be checked
first. Section 31 mentions the time at which a tax invoice has to
be issued. If the event necessitating the issuance of invoice has
taken place, then it cannot be stated that the supply has not
been made. The supplier shall maintain strong proof/reasons to
prove that the supply has not been made. In case the supply
does not take place, then only a credit note can be issued by
the supplier in accordance with section 34 of the CGST Act
against the invoice already raised.

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Practical FAQ’s under GST

Q338. Whether a general credit note issued after sale can reduce the
supplier’s outward liability?
Ans Credit notes can be issued only by the supplier. When a credit note
is issued within the time prescribed by section 34(2) of the CGST
Act, then the output tax liability can be reduced to the extent of value
as mentioned in the credit note. General credit note here means
financial or commercial credit note which contains no reference to
the GST amount. The base price is considered, and no GST impacts
are considered.
Hence, GST credit note is different from financial credit note and
GST may not impact the transaction.
Q339. Can a supplier reverse the tax paid on the advance received in
case the final supply is not made?
Ans. Yes, the tax can be reversed as the final supply has not been made
to the recipient. A refund voucher needs to be issued and same can
be adjusted in Form GSTR-3B in the month in which the refund
voucher is issued.

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 Chapter 9
Registration
Q340. A milk vendor, is engaged in trading of milk with a turnover of
` 39 lakhs, which is exempt. He is also engaged in trading of
taxable products like paneer, ghee and milk sweets and the
turnover of such taxable products works out to ` 2 Lakh.
Whether the milk vendor has to take registration under GST?
Ans. Going by the third proviso to section 22(1) of the CGST Act if a supplier
is engaged exclusively in the supply of goods and whose aggregate
turnover as per section 2(6) of the CGST Act in a financial year exceeds
` 40 Lakhs, then such supplier is liable to take registration under GST.
Aggregate turnover includes both taxable supply as well as exempted
supply. Thus in the given case, the aggregate turnover, of milk vendor
works out to ` 41 Lakhs as it includes the receipts from trading of Milk
for ` 39 Lakhs which, though exempted as per Sl.No. 25 of NN 2/2017-
CTR under the heading HSN 0401, has to be considered for computing
the aggregate turnover and the taxable turnover from trading of paneer,
ghee and milk sweets as per NN 1/2017-CTR which works out to ` 2
Lakh is also to be considered. Since the aggregate turnover in a
financial has exceeded the threshold limit of ` 40 Lakh, the milk vendor
is liable to take registration as per section 22(1) of the CGST Act.
Q341. Whether the place of supply of goods or services determines
the requirements of registration in a particular State. Discuss
this in the light of the phrase ‘from where he makes a taxable
supply of goods or services or both’ used in section 22 of the
CGST Act read with section 22 of the SGST Act?
Ans. The place of supply of goods or services will not determine the
requirements of taking registration in a particular State as per
section 22(1) of the CGST Act or section 22(1) of the SGST Act but
is being applied only for determining the nature of supply, whether it
is inter-State supply as per Section 7 of the IGST Act or intra-State
supply as per section 8 of the IGST Act. The place of supply of
goods or services is separately dealt with in Chapter V of the IGST
Act in sections 10 to 14. Though the meaning of the phrase ‘place of
Practical FAQ’s under GST

supply’ can be easily understood from common parlance, it is being

given legal sanctity and whose meaning is to be determined by
examining the respective sections of Chapter V of the IGST Act and
it has to be identified for deciding the nature of supply. Thus, the
application of place of supply of goods or services has no relevance
and will not be a determinant for taking registration under GST.
However the phrase ‘from where he makes a taxable supply of
goods or services or both’ used in section 22(1) of the CGST Act is
to guide the supplier in which State he has to take registration under
GST. Especially the phrase ‘from where’ means the location or place
of business from where all the business decisions are being taken or
where the ‘seat of management and control’ is located, who will
decide the activity of supply of goods or services or both. Thus
registration is required to be taken only at the place of business
where business is ordinarily carried on.
Place of business as per section 2(85) of the CGST Act includes –
(a) a place from where the business is ordinarily carried on,
and includes a warehouse, a godown or any other place
where a taxable person stores his goods, supplies or
receives goods or services or both; or
(b) a place where a taxable person maintains his books of
account; or
(c) a place where a taxable person is engaged in business
through an agent, by whatever name called”
Place of business therefore not only includes the place where the
business is ordinarily carried on but also all geographical locations
like warehouse or godown or any other place, where the taxable
person stores goods under his control for further supply. This could
have been the reason for not defining the ‘location of supplier of
goods’ in law as the goods can be easily traced, unlike services,
where the ‘location of supplier of services’ has been defined
specifically in section 2(71) of the CGST Act.
Place of business and place of supply cannot be understood
synonymously. Registration is required only at the place of business

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 Registration

and not at the place of supply. For instance in case of renting of

immovable property service the registered person is holding
registration certificate in Maharashtra but owns properties in
Rajasthan and Gujarat which he has let on hire for commercial
purpose. Thus in this example the place of supply of service may be
the location where the immovable property is located (i.e.) in
Rajasthan and Gujarat, but the place of business is the location
where the business decisions are ordinarily taken (i.e.) Maharashtra.
Similarly in another example, a supplier in Maharashtra intends to
supply goods to a customer in Andhra Pradesh, but the goods are
imported and presently in Customs Bonded Warehouse at Kolkata.
Question arises whether such supplier is required to take
registration in Kolkata for dispatching the goods to the customer in
Andhra Pradesh. Registration is not required in Kolkata, West
Bengal, because the goods are cleared for domestic consumption in
the name of the supplier and will be handed over to the customer at
Andhra Pradesh and until then the risk and reward will be with the
supplier. Moreover registration is not required for all locations where
the goods will be stored during transshipment as point of storage at
the discretion of the transporter. Place of supply of goods in this
example as per section 10(1) (a) of IGST Act shall be the location
where the movement of goods terminates for delivery to the recipient
(i.e.) Andhra Pradesh. Registration also not required in Andhra
Pradesh as that is not the location ‘from where’ the taxable supply
took place.
Q342. A Football Academy is supplying services from Delhi and
Mumbai. Whether the Academy should take separate
registration in each State?
Ans. If a Football Academy is supplying services from both the locations
namely Delhi and Mumbai, then as per section 22(1) of the CGST
Act read with section 22(1) of Maharashtra GST Act and Delhi GST
Act, it is liable to take separate registrations under respective State
GST Acts. Thus, two separate registrations have to be taken. Every
State will be treated as a separate taxable territory in GST. Such
registered persons will be treated as distinct persons for the purpose
of section 25 of the CGST Act. Any supply of goods or services or

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Practical FAQ’s under GST

both between these entities shall be treated as supply as per Entry

No. 2 of Schedule I to the CGST Act, even though such supply is
without consideration.
Q343. A registered person is engaged in the sale of seeds, which are
exempt from GST. Is it possible for such registered person to
cancel their registration already taken under GST regime?
Ans. Registered person can very well cancel their registration if they are
exclusively engaged in the sale of seeds that are exempted as per
NN 2/2017-CTR.Though the registered person has taken registration
earlier voluntarily under section 25(3) of the CGST Act, but now they
can avail the exemption from registration as per section 23(1) (a)
thereof, as such person is engaged exclusively in the supply of
seeds which is wholly exempt from tax. Thus, such registered
person can very well apply for cancellation of registration as per
section 29(1) (c) of the CGST Act expressing his intent to opt out of
the Registration voluntarily made under Section 25(3) thereof.
Q344. A Residential Apartment Owners Welfare Society receives
monthly subscription for maintenance and other facilities,
which is less than ` 7,500/- per month per member. Aggregate
contribution per annum from the Members on account of
subscription works out to ` 50 Lakhs. Apart from this the
Society receives rental income and advertisement income
which works out to ` 5 Lakhs. Whether such society is liable to
be registered under GST?
Ans. As the Residential Apartment Owners Welfare Society is engaged in
supply of service to their members in the form of maintenance
and other facilities and the subscription collected per month per
member is less than ` 7,500/-, its services are exempt by virtue of
Sl.No.77 (c) of NN12/2017-CTR under heading 9905. However for
computing the threshold limit for taking registration as per section
22(1) of the CGST Act, both exempted as well as taxable supplies
have to be considered for computing the aggregate turnover as per
section 2(6) thereof. In the given case, the aggregate turnover of the
Society works out to ` 55 Lakhs, which includes exempted supply of
subscription from members of ` 50 Lakhs and taxable supply of
rental income & advertisement income of ` 5 Lacs. Since the

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 Registration

aggregate turnover in a financial year has exceeded the threshold

limit of ` 20 Lakh, the Society is liable to take registration as per
section 22(1) of the CGST Act and has to discharge appropriate tax
liability on rental income and advertisement income.
Q345. Whether GST registration is required even if the export turnover
is less than ` 20 lakh?
Ans. Export of goods or services or both are treated as inter-State
supplies as per section 7(5) (a) of the IGST Act. Hence, as per
section 24(i) of the CGST Act, the person who is engaged in export
of goods or services or both are compulsorily required to take
registration irrespective of the fact that such export turnover is less
than ` 20 Lakhs. However by virtue of NN 10/2017-ITR as amended
by Notification No. 3/2019-Integrated Tax dated 29.01.2019 read
with section 20 of the IGST Act and section 23(2) of the CGST Act,
the persons making inter-State supply of taxable services are being
exempt from taking registration if the aggregate turnover computed
on all India basis is less than ` 20 Lakhs. For example, freelance
journalists, software professionals, visiting faculty to foreign
universities, etc. who are engaged exclusively in supply of services
though naturally work from home, need not take registration if their
aggregate turnover is below the threshold limit of ` 20 Lakhs.
But this exemption from registration is not applicable for the persons
who are engaged in export of goods and thus they are mandatorily
required to take registration as per section 24(i) of the CGST Act
since inception. However such persons can export the goods or
services or both, as per section 16(3) of the IGST Act, either without
payment of integrated tax under LUT or Bond and can claim refund
of such unutilised ITC or with payment of integrated tax and can
claim refund of such Integrated tax paid.
However, in the case of export of services, when turnover is less
than the threshold limit, the GST paid on inward supplies will form
part of the cost of output services in case registration is not taken. It
is pertinent to mention here, that taxpayer can avail the benefit of
refund only if registered under GST, even if turnover is less than that
of the threshold limit.

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Q346. Whether reverse charge value to be considered in threshold

turnover for the purpose of registration?
Ans. The definition of the term “aggregate turnover” under section 2(6) of
the CGST Act, specifically excludes inward supplies on which tax is
payable by a person on reverse charge basis. Therefore, the value
of transaction, liable for RCM and paid by the recipient of goods/
services, may not be considered for the purpose of the threshold
limit of turnover for the purpose of registration under section 22(1) of
the CGST Act.
It may also be noted that a person who receives supplies liable for
payment of taxes under the RCM is liable for compulsory registration
under section 24 of the CGST Act.
Q347. Whether registration is required for a person who is engaged in
sale of alcoholic liquor for human consumption and whose
annual turnover exceeds the threshold limit of registration
under section 22(1) of the CGST Act?
Ans. The person is engaged exclusively in supply of alcoholic liquor for
human consumption, which is a non-taxable supply as per
section 2(78) of the CGST Act. Though, the turnover exceeds the
threshold limit for taking registration as per section 22(1) of the
CGST Act, still such person is not required to take registration. This
is because section 23(1) (a) of the CGST Act specifically provides
that a person engaged exclusively in the business of supplying
goods or services or both that are not liable to GST is not required
to get registered under the Act. As per section 22(1) of the CGST
Act, it seems that registration is required if the aggregate turnover
as per section 2(6) of thereof exceeds the threshold limit of ` 20
Lakhs or ` 40 Lakhs, as the case may be. The definition of
aggregate turnover includes exempt supplies as per section 2(47) of
the CGST Act, which in turn includes non-taxable supply as defined
in section 2(78) of the CGST Act. As such non-taxable supply
means the supplies which are not leviable to GST viz., alcoholic
liquor for human consumption, petroleum crude, high speed diesel,
and motor spirit, natural gas and aviation turbine fuel.
Based on the foregoing discussion, it is concluded that the person
who is engaged exclusively in supply of alcoholic liquor for human
consumption is not required to take registration under the GST law.

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 Registration

Q348. Whether sale of old furniture on YLX (Electronic Commerce

Operator) will entail compulsory registration and attract tax
collection at source (“TCS”)?
Ans. As per Section 24(ix) of the CGST Act, every person supplying
goods through an electronic commerce operator (“e-commerce
operator”) who is required to collect tax at source under Section 52,
shall be mandatorily required to obtain registration irrespective of
the value of supply made by him.
Further, Section 52 of the CGST Act provides for TCS, by the
e-commerce operator in respect of the taxable supplies made
through it by other suppliers, where the consideration in respect of
such supplies is collected by such e-commerce operator.
In the instant case, the supplier selling old furniture through YLX
shall be directly negotiating the price with the buyer and collect the
consideration from the buyer since YLX is a classified platform and
does not handle payments on behalf of the suppliers.
Therefore, the supplier shall not be required to compulsorily obtain
registration under GST and YLX shall also not be required to collect
tax at source under Section 52 as the consideration is not collected
by YLX.
Q349. Explain the concept of distinct persons as specified in
section 25 of the CGST Act?
Ans. Section 25(4) and (5) of the CGST Act reads:
“(4) A person who has obtained or is required to obtain more than
one registration, whether in one State or Union territory or more
than one State or Union territory shall, in respect of each such
registration, be treated as distinct persons for the purposes of
this Act.
(5) Where a person who has obtained or is required to obtain
registration in a State or Union territory in respect of an
establishment has an establishment in another State or Union
territory, then such establishments shall be treated as
establishments of distinct persons for the purposes of this Act.”
As could be inferred from above, two or more units or branches of
same business entity having a common PAN, but having separate

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registrations under GST law in the same State or in different States,

are considered as distinct persons for the purpose of GST Law as
provided in section 25(4) & section 25(5) of the CGST Act. Supply of
goods or services between these distinct persons are liable for GST
even if such supply is done without consideration as per Entry No. 2
of Schedule I of the CGST Act. For example, the Mumbai branch of
State Bank of India in Maharashtra and Chennai branch of State
Bank of India in Tamil Nadu are two distinct persons for the purpose
of section 25 of the CGST Act.
Q350. If a person is engaged in the supply of both goods and
services, how the threshold limit will be calculated for
registration purpose as per section 22 of the CGST Act?
Ans. If a supplier is engaged in supplying both goods and services, then
such supplier has to take registration if the aggregate turnover as
per section 2(6) of the CGST Act exceeds ` 20 Lakhs as per
section 22(1) thereof. Aggregate turnover includes both taxable
supply and exempted supply. This is very much evident from the
third proviso to section 22(1) of the CGST Act by which the
threshold limit for registration was enhanced to ` 40 Lakh only in
case such supplier is engaged exclusively in the supply of goods.
The only exception for the above is even if a person is engaged in
the supply of service by way of extending deposits, accepting loans
or advance and the consideration is received only in the form of
interest or discount, still he will be considered as a person engaged
exclusively in the supply of goods. For example if a taxable person
is supplying goods for ` 35 Lakhs and interest income from fixed
deposit in a bank is ` 4 Lakhs. Then in such case the taxable
person need not take registration, inspite of the fact that the taxable
person has engaged in the supply of the above specified services,
as the threshold limit is only ` 39 Lakhs.
Q351. Whether turnover on account of sale of alcoholic liquor for
human consumption and crude oil will form part of aggregate
turnover to determine the threshold limit for taking registration
under GST?
Ans. As per section 2(6) of the CGST Act, aggregate turnover includes
the value of exempt supplies. Exempt supply as per section 2(47) of

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 Registration

the CGST Act includes non-taxable supply. Non-taxable supply as

per section 2(78) of the CGST Act means a supply of goods or
services or both which is not leviable to tax under GST. Thus supply
of alcoholic liquor for human consumption and crude oil though
being non-leviable to tax under GST law as per section 9 of the
CGST Act, however will form part of aggregate turnover computed
on all India basis for computing the threshold limit for taking
Registration under section 22(1) thereof.
Q352. When a person is engaged in the supply of both good and
services then what is the threshold limit for taking registration
in a State other than the Special Category State?
Ans. On a conjoint reading of section 22(1) of the CGST Act and the third
proviso to section 22(1) thereof it is understood that if a person is
engaged in supply of goods and services then the threshold limit for
taking registration in a State other than the Special Category States,
is only ` 20 Lakhs. Special Category States for the purpose of
registration under section 22 of CGST Act is Mizoram, Manipur,
Nagaland and Tripura. Further, the threshold limit of ` 40 Lakhs is
applicable only for a person who is engaged exclusively in supply of
goods and the only exception is that even such person can engage
in supply of services and that service should be only by way of
extending deposits, loan or advances and the consideration is
received in the form of interest or discount.
Q353. A Hotel is engaged in supply of residential / lodging
accommodation and also restaurant service. Hotel room
charges are less than ` 1000/- per day. Aggregate receipts from
lodging / accommodation service and restaurant service works
out to ` 15 Lakh p.a. and ` 8 Lakhs p.a. respectively. Whether,
such hotel is required to take registration under GST?
Ans. As per Sl.No. 14 of NN12/2017-CTR if a hotel is engaged in letting a
room on hire for residential or lodging purposes, it is exempted from
GST, if the value of supply collected is upto ` 1000/- per day per
room. Going by this exemption entry, in the given case, since the
room charges collected by the hotel is less than ` 1000/- per day it
is exempted from the levy of GST. However, the Restaurant services
provided by the Hotel are taxable and liable for GST. As per section

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22(1) of the CGST Act, if a person is engaged in supply of goods

and services then the threshold limit for taking registration in a State
other than the Special Category States is only ` 20 Lakhs. Special
Category States for the purpose of registration under Section 22 of
the CGST Act is Mizoram, Manipur, Nagaland and Tripura.
Aggregate turnover as per section 2(6) thereof includes both taxable
supply as well as exempted supply.
Thus in the given case, the aggregate turnover, of hotel works out to
` 23 Lakhs as it includes the receipts from accommodation service
of ` 15 Lakhs which is exempted and the restaurant service of ` 8
Lakhs which is taxable. Since the aggregate turnover in a financial
year has exceeded the threshold limit of ` 20 Lakh, the Hotel is
liable to take registration as per section 22(1) of the CGST Act and
discharge the tax liability accordingly on the Restaurant services.
Q354. Whether an unregistered person can engage himself in
inter-State taxable supply or not?
Ans. As per Section 24(i) of the CGST Act, if a person intends to make
any inter-state taxable supply, whether of goods or services or both,
is compulsorily required to take registration irrespective of the
threshold limit specified in section 22(1) thereof. Thus if a person
located in Pune, Maharashtra wants to supply goods to Kolkata,
West Bengal, then he is required to take registration mandatorily.
However, there is an exception to this - if the person intends to
make inter-State supply of services then such person need not
compulsorily take registration if the aggregate turnover in a financial
year has not exceeded ` 20 Lakhs [Section 23(2) of the CGST Act
read with NN 10/2017-ITR as amended by Notification No. 03/2019 -
Integrated Tax dated 29.01.2019.]
For example, a Practicing Chartered Accountant in Chennai, whose
aggregate turnover is only ` 18 Lakhs, did not take registration in
GST and now he wants to empanel himself as an Examiner with a
University in New Delhi for valuation of exam answer scrips, and for
supply of this inter-State supply of service he need not take
registration as per the above Notification. But this specific exemption
from registration is not applicable for the persons who are engaged
in inter-State taxable supply of goods and thus they are mandatorily

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required to take registration as per section 24(i) of the CGST Act

since inception.
Q355. A Hotel is engaged in supply of residential / lodging
accommodation service, restaurant service and supply of
alcoholic liquor for human consumption in it’s Bar. Annual
aggregate receipts from lodging accommodation service are
` 30 Lakhs, restaurant service is ` 30 Lakhs and supply of
alcoholic liquor for human consumption is ` 40 Lakhs per
annum. What would be the aggregate turnover for the purpose
of computing the threshold limit for taking registration
under GST?
Ans In the given case, supply of residential / lodging accommodation
service may be either a taxable service or an exempted service if
the value of supply (i.e.) room charges collected per unit of
accommodation is upto ` 1000/- per day, as per Sl. No. 14 of
NN12/2017-CTR. Either way for computing the aggregate turnover
both taxable and exempted supply has to be considered. Similarly
the receipts from Restaurant Service constitute a taxable supply,
which has to be considered for computing the aggregate turnover.
Finally as far as the supply of alcoholic liquor for human
consumption in Bar is concerned, it is a non-taxable supply as per
section 2(78) of the CGST Act and thereby it is included in the
exempt supply as per section 2(47) thereof and is to be considered
for computing the aggregate turnover.
Thus in the given case, the aggregate turnover, of Hotel works out to
` 100 Lakhs as it includes the receipts from accommodation service
of ` 30 Lakhs, Restaurant service of ` 30 Lakhs and Bar Income of
` 40 Lakhs. Since the aggregate turnover in a financial year has
exceeded the threshold limit of ` 20 Lakh, the Hotel is liable to take
registration as per section 22(1) of the CGST Act and discharge the
tax liability accordingly.
Q356. A Freelancer in Chennai is supplying services to foreign
entrepreneurs through Online Websites. Whether the threshold
limit for taking registration under GST is ` 40 Lakhs or
the registration has to be taken from the inception of the
business?

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Ans. The service provided by the Freelancer to the foreign entrepreneurs

through Online Websites amounts to export of services as per
Section 2(6) of the IGST Act as the following conditions are
sequentially fulfilled:
a. Location of supplier (freelancer) as per section 2(15) of the
IGST Act is in Chennai, India
b. Location of recipient (foreign entrepreneurs) as per
section 2(14) of the IGST Act is outside India
c. As per Section 13(2) of the IGST Act, the place of supply of
services provided through Online Websites by the freelancer
shall be the location of the recipient (foreign entrepreneurs)
which is outside India
d. Payment for such service was received in convertible foreign
currency
e. The supplier of service being the freelancer and the recipient of
service being the foreign entrepreneur are not merely
establishments of a distinct person in accordance with
Explanation 1 in section 8 of the IGST Act.
Once the service provided by the freelancer is treated as export of
services, we have to determine whether registration has to be taken
mandatorily since inception of the business.
Export of services is treated as inter-State supplies as per
section 7 (5)(a) of the IGST Act. Hence as per section 24 of the
CGST Act, the person who is engaged in export of services is
compulsorily required to take registration from the beginning
irrespective of the threshold limit specified in section 22(1) thereof
(i.e.) ` 20 Lakhs. However by virtue of NN 10/2017-ITR as amended
by Notification No. 3/2019-Integrated Tax dated 29.01.2019 read
with section 20 of IGST Act and section 23(2) of the CGST Act, the
persons making inter-State supply of taxable services are being
exempted from taking registration if the aggregate turnover
computed on all India basis is less than ` 20 Lakhs. Thus, in the
given case the Freelancer can be adviced to take registration under
GST from the beginning so that the GST paid on inputs can be
claimed as a refund.

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Q357. Whether a person wholly engaged in supply of services on a

PAN India basis, by way of collection of toll charges for access
to a road or bridge on payment of toll charges is required to
take registration mandatorily under GST?
Ans. As per Sl. No. 23 of NN12/2017-CTR, services by way of access to a
road or bridge on payment of toll charges is wholly exempt from tax
under Heading 9967. In that case if a person is engaged exclusively
in the above services which are wholly exempt from levy of GST,
then such person is not liable to take registration as per
section 23(1)(a) of the CGST Act, irrespective of the threshold limit
specified in section 22(1).
Thus, in the given case if it is presumed that the person in the
question happens to be a sub-contractor appointed by the main
contractor for collection of ‘toll charge’ from the end user, then the
question arises in such case as to whether the exemption entry
specified in Sl. No. 23 of NN12/2017-CTR extends to such
sub-contractor also. It is informed that the toll charges are collected
by the sub-contractor; still the exemption provided in Sl. No. 23 of
NN12/2017-CTR applies to him, as the services by way of access to
a road or bridge on payment of ‘toll charges’, is an activity based
exemption, irrespective of the fact as to who provides the service or
who receives the service.
Further, the issue here will be if such sub-contractor retains a
portion of ‘toll charges’ as his margin while remitting the toll
collection amount to the main contractor then the said exemption will
not apply to the extent of that margin amount. This is because the
services provided by the sub-contractor to the main contractor for
which the margin amount is retained by him as consideration, is not
equivocal to toll services. Thus the sub-contractor is liable to pay
GST on the margin amount retained by him and as far as the
registration for such sub-contractor is concerned, the sub-contractor
is providing two services- one is the services provided to the end
user by way of allowing them the access to the road or bridge by
collecting toll charges which is exempted as per the above entry and
another one is to the main contractor by way of collection of toll
charges in a fiduciary capacity from the end user for which he
retains a portion of toll charges as margin amount, which is taxable.

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As the aggregate turnover as per section 2(6) of the CGST Act

includes both taxable supply as well as exempted supply. Thus, if
sub-contractor’s gross receipts from both the above services exceed
` 20 Lakhs, then he is hit by section 22(1) of the CGST Act and
thereby he is liable to take registration under GST.
Q358. A Registered person is primarily engaged in trading in
Medicines. Now he has sold his business old furniture and paid
GST as applicable. Selling furniture is not his main business.
For selling this furniture whether such registered person has to
amend his Registration Certificate to include the HSN code of
furniture.
Ans. Though the registered person is primarily engaged in trading of
Medicine, but when he intends to sell business old furniture, then
HSN Code applicable for such furniture has to be entered in the
Goods Tab in Registration Portal by making an amendment as
prescribed in section 18 of CGST Act read with Rule 19 of CGST
Rules. But, the common portal will allow a registered person to
include only 5 HSN Codes to be entered in the Goods Tab and such
HSN entries will usually be mentioned only on the basis of the top 5
goods they are dealing in maximum. In the given case, since the
registered person’s main business is trading in Medicines, if he had
already entered 5 HSN entries relating to Medicines in the Goods
Tab, then in such case it may not be possible for him to include,
further entries. In that case technically there is no scope for the
registered person to include the HSN code for furniture in Goods
tab. One suggestive action, though not specifically mentioned in the
law, but for good governance, could be that a mail can be sent to the
Jurisdiction Officer about this sale of old furniture and its
corresponding HSN code. However, if 5 entries are not already
entered in the Goods Tab, then it is advisable to enter the HSN code
for furniture through an amendment which does not require any
approval of the tax official.
Q359. Section 23 of the CGST Act inter-alia provides exemption for
entities engaged exclusively in exempt supplies. What if a
doctor or advocate sells their used office furniture or
equipment? Will it trigger section 22 of the CGST Act for
registration?

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Ans. Section 23(1)(a) of the CGST Act specifically exempts a person from
taking registration if such person is engaged exclusively in the
supply of goods or services which are wholly exempted from GST,
irrespective of the threshold limit specified in section 22(1) thereof.
Thus a Doctor, being an Authorised Medical Practitioner, who is
primarily engaged in health care services which is exempted from
levy of GST as per Sl. No. 74 of NN12/2017-CTR / Sl. No. 77 of NN
9/2017-ITR, need not take registration as per section 23(1) (a). But
if such Doctor is engaged in any of the supplies which are taxable,
for instance, sale of used office furniture or equipment, then he is hit
by section 22(1) of the CGST Act and if the aggregate turnover from
such activity of the Doctor exceeds the threshold limit of ` 20 Lakhs,
then he is liable to take registration.
Similarly, in case of an Advocate who is exclusively engaged in
supplying Legal Services to a business entity then as per section
9(3) of the CGST Act read with Sl. No. 2 of NN 13/2017-CTR, the
applicable tax on such legal services shall be paid by the recipient
(i.e.) the business entity located in taxable territory under RCM.
Thus, as per Notification No. 5/2017-Central Tax dated 19.06.2017
read with Section 23(2) of CGST Act, such Advocate is exempted
from taking registration. Further, if the same Advocate is also
engaged in supply of Legal Services to a person other than business
entity, then in such scenario also, he is exempt from taking
registration as per Section 23(1) (a) of CGST Act, as such Legal
Services are exempt from levy of GST as per Sl. No. 45 of
NN 12/2017-CTR / Sl. No. 47 of NN 9/2017-ITR. But, if such
advocate is engaged in providing any of the supplies which are
taxable, for instance, sale of used office furniture or equipment, then
he is hit by Section 22(1) of CGST Act and if the aggregate turnover
exceeds the threshold limit of ` 20 Lakhs, then such Advocate is
liable to take registration.
Q360. A Lady Doctor (Dentist) has gross annual receipts from her
profession of ` 18 Lakhs. Apart from this, she receives rent of
` 5 Lakhs p.a. from letting on hire her commercial property.
Further she also receives Family pension of ` 2 Lakhs p.a.
Whether she is liable to take registration under GST, and if so,
whether she has to collect GST on commercial rent?

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Ans. Section 23(1)(a) of the CGST Act specifically exempts a person from
taking registration if such person is engaged exclusively in supply of
goods or services which are wholly exempt from GST, irrespective of
the threshold limit specified in section 22(1) thereof. Thus the lady
doctor, being an Authorised Medical Practitioner, primarily engaged
in Health Care Services which is exempt from levy of GST as per
Sl. No. 74 of NN12/2017-CTR / Sl. No. 77 of NN 9/2017-ITR, need
not take registration as per section 23(1) (a). But since such doctor
is also engaged in certain supplies which are taxable, for instance,
she receives rent of ` 5 Lakhs p.a. from letting on hire her
commercial property, which is taxable at rate specified in
NN 11/2017-CTR, she is hit by section 22(1) and if the aggregate
turnover exceeds the threshold limit of ` 20 Lakhs, then she is liable
to take registration.
The lady doctor also receives family pension which is in the form of
regular monthly amount payable by the employer to a person
belonging to the family of an employee in the event of his death as
per the Explanation to section 57 of the Income Tax Act, 1961. Thus,
for receiving this family pension the lady doctor has not done any
activity which amounts to consideration for the recipient who pays
the family pension and thus the Family pension received by the lady
doctor will not fit in to the scope of supply as provided in
section 7(1)(a) of the CGST Act. Hence this need not be included
while computing the aggregate turnover for calculating the threshold
limit for taking registration under GST. Aggregate turnover as per
section 2(6) of the CGST Act includes both taxable supply as well as
exempted supply.
Thus in the given case, the aggregate turnover, of the lady doctor
works out to ` 23 Lakhs as it includes the receipts from Health Care
service of ` 18 Lakhs which is exempt and ` 5 lakhs being the rent
from the letting out of her immovable property which is taxable.
Since the aggregate turnover in a financial year has exceeded the
threshold limit of ` 20 Lakh, the lady doctor is liable to take
registration as per section 22(1) of the CGST Act and discharge the
tax liability on rent received from letting on hire of her immovable
property.

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Q361. A Practicing Chartered Accountant [CA] in Chandigarh, apart

from his profession, engaged in supply of renting of immovable
property service by way of letting on hire his immovable
properties located in Haryana, Delhi, Punjab and Chandigarh.
Whether such practicing CA has to take separate registration in
Haryana, Delhi and Punjab, apart from his existing registration
in Chandigarh, for supplying renting of immovable property
services in those States or he can raise Bill from his
Chandigarh Registration by levying IGST.
Ans. The Practicing CA, registered in Chandigarh, has to take separate
Registration in all the States viz., Haryana, Delhi and Punjab where
the immovable properties are situated and all services in relation to
immovable properties including renting are supplied only from those
States where the immovable properties are located, as per Section
22(1) of the CGST Act. For determining whether the Practicing CA
has to take registration in other States where the immovable
properties are located, it is pertinent to know the place from where
he makes a taxable supply of goods or services or both and such
place shall be construed as place of business as per Section 2(85)
of the CGST Act. Thus in the instant case the place where the
immovable property is situated shall be place from where the
business is ordinarily carried on, hence it is suggested to take
registration in all States where immovable property is located as
taxable supply of service is effected from such States.
Similarly for determining whether IGST or CGST & SGST has to be
levied, first we have to determine the nature of Supply whether it is
Inter-State supply as per Section 7 of the IGST Act or Intra-State
supply as per Section 8 of the IGST Act. For a supply to be an
Inter-State supply the location of supplier of service and place of
supply of such service should be in two different States and if it is in
same State, then it will be Intra-State Supply.
Location of Supplier of Service as per Section 2(15) (a) of the IGST
Act means a place of business from where supply is made for which
the Registration has been obtained. In the given case, as per the
foregoing discussions, the tax payer has to take registration in all
the States viz., Haryana, Delhi and Punjab, where the immovable
properties are located and all the those places will be construed as
place of business from where the business is ordinarily carried on.

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Once the registrations are taken in those States, eventually those

places will become the Location of supplier of Service.
Further as per Section 12(3) of the IGST Act, the place of supply of
service in relation to immovable property by way of granting of rights
to use immovable property shall be the location where the
immovable properties are located. Thus, in the instant case since
the immovable properties are located in Haryana, Delhi and Punjab,
the Place of Supply shall be that respective State where the
immovable properties are located. Since the location of CA, being
the supplier of service is in each State where immovable properties
are located and the place of supply of such service are also in the
same State, this is a clear case of Intra-State supply and CGST &
SGST of that respective States has to be levied on such renting of
immovable property services.
Q362. X who is registered in Bangalore wants to supply goods to
Chennai by procuring the goods from a supplier in Chennai.
Whether for making such supply fresh registration is required
in Chennai?
Ans. Registration under GST is not required in Chennai because as per
section 22(1) of the CGST Act, registration is required only in the
State 'from where' the taxable supply is being made. In the given
case, the supply is being made only from Bangalore, Karnataka
because there is no physical location in the form of warehouse,
godown, stores or any other place, in Chennai, where the goods
received from the supplier are being stored, under the control of X,
before delivery to their customers in Chennai. Thus, on the basis of
the direction of X in Bangalore the supplier in Chennai is delivering
the goods to the customers of X. Moreover, registration is not
required for all locations where the goods will be stored during
transhipment as point of storage at the discretion of the transporter.
Hence, no separate registration is required for X in Chennai for this
supply. As far as this transaction is concerned X is making an
inter-State supply of goods as per section 7(1) of the IGST Act. This
is because, the Location of supplier of goods is in Bangalore,
Karnataka and place of supply as per section 10(1) (b) of the IGST
Act, shall be the location where the movement of goods terminates
for delivery to the recipient (i.e.) in Chennai, Tamil Nadu.

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Q363. A builder engaged in construction of building on a PAN India

basis is having the Corporate Office in Bangalore, Karnataka.
The builder also holds a registration in Bangalore, Karnataka.
He is also engaged in construction services, being executed in
different States. Whether the builder is required to take
registration in all States where he is constructing buildings?
Ans. It is advisable to have registration in all States where the builder is
doing construction work, because considering the nature of
construction services though all the decisions regarding execution of
work at the construction site may be taken at the Corporate Office in
Bangalore, Karnataka, where the ‘seat of management and control’
is located , those decisions which are taken are being effectively
delegated to be carried out by the competent team located at the
site with all necessary human and technical resources. Thus the
construction site is characterised with permanence making it a fixed
establishment as per section 2(7) of the IGST Act.
Further, in addition to the above in a construction project usually the
builder will be procuring and storing the construction materials in a
particular location and thereafter carries out the construction work at
the site. Hence all those locations will be fulfilling the requirements
of place of business as per section 2(85) of the CGST Act as it is
defined to include ‘any other place’ where the taxable person stores
his goods or supplies or receives goods or services or both. Thus,
all the construction sites where the Builder is storing goods will be
considered as a place of business and he is liable to take
registration for such construction sites.
Alternatively, it can also be argued that the builder will not be storing
any goods at the construction site and will procure locally and will
supply as and when needed. Even in that scenario, going invariably
by provisions of fixed establishment concept as per section 2(7) of
the IGST Act, one has to take registration if a place is characterised
by sufficient degree of permanence and suitable structure in terms
of human and technical resources to supply services or to receive
and use services for its own needs. All these requirements
will be fulfilled in case of a construction site without which the
completion of construction services will not be holistic in a common
industry practice. Once the construction site is treated as fixed

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establishment, then it becomes the location of supplier of services

and consequentially registration has to be taken for that construction
site as per section 22(1) of the CGST Act, because that location in
that State shall be the place from where the taxable supply of
service is being made.
Based on the foregoing discussions, on an overall conclusion it is
advisable for the builder to take registration in all States where the
construction services are being carried out.
Q364. A person, whose aggregate turnover has not exceeded the
threshold limit for taking registration under section 22(1) of the
CGST Act, has received certain inward supplies on which he is
liable to pay GST under RCM as per section 9(3) of the CGST
Act. In such scenario, whether he is still required to get
registered under GST and if so, under which section?
Ans. As per section 24(iii) of the CGST Act, a person is liable to take
compulsory registration under GST, if such person is required to pay
tax on inward supply of goods or services or both under reverse
charge as per section 9(3) or 9(4) of the CGST Act or section 5(3) or
5(4) of IGST Act, irrespective of the fact that the aggregate turnover
as per section 2(6) of the CGST Act is less than the threshold limit
(i.e.) ` 20 Lakhs in case of goods and services/services alone or
` 40 Lakhs in case of goods alone. In the given case, though the
person’s aggregate turnover is less than the threshold limit for taking
registration under GST, still such person is liable to pay GST on
certain inward supply of goods or services or both under RCM, and
is therefore liable to take registration mandatorily.
For example, a partnership firm engaged exclusively in sale of
electrical items and the aggregate turnover is only ` 35 Lakhs per
annum. But during the financial year the firm has availed the
services of GTA and paid lorry freight of ` 50,000/- on 25 occasions.
In such case the partnership firm is liable to pay GST under RCM as
per Sl. No. 1 of NN 13/2017-CTR read with section 9(3) of the
CGST Act. In such scenario, the partnership firm is liable to take
registration as per section 24(iii) of the CGST Act, irrespective of
the fact that its aggregate turnover is only ` 35 Lakhs, which is less
than the threshold limit for taking registration under section 22(1) of

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the CGST Act. Once registration is obtained, it has to comply with

all the provisions as are applicable to a registered person. Thus, the
partnership firm has to pay applicable GST on sale of electrical
items.
It is pertinent to mention that, every inward supply is liable to tax
under RCM but registration is not compulsory. For example, if the
partnership firm is availing legal services from an Advocate and has
paid ` 1 Lakh as legal fees, then in such case, the partnership firm
is not required to pay GST under reverse charge as such
partnership firm will be the business entity whose aggregate
turnover is only ` 39 Lakhs which is less than threshold limit for
taking registration and hence such legal services provided by an
Advocate are exempted by virtue of Sl. No. 45 of NN12/2017-CTR.
Therefore, the partnership firm is not required to take registration
either under section 24(iii) of the CGST Act or under section 22(1).
Q365. If a person is engaged exclusively in supply of exempted goods
or supply of exempted services in the form of services by an
educational institution or health care services. Whether such
person is required to obtain registration under section 24(iii) of
the CGST Act as such person has received certain inward
supply of goods or services on which tax is liable to be
paid under reverse charge as per section 9(3) or 9(4) of the
CGST Act?
Ans. As per section 23(1)(a) of the CGST Act, if a person is engaged
exclusively in supply of wholly exempted goods as specified in
NN 2/2017-CTR or wholly exempted services as specified in
NN12/2017-CTR, then such person is exempted from taking
registration under GST. However, if such person is a hospital being
a clinical establishment engaged in supply of Health Care Services
which is an exempted services by virtue of Sl. No. 74 of NN12/2017-
CTR / Sl. No. 77 of NN 9/2017-ITR. And such Hospital has imported
technical consultancy services with respect to information
technology from an overseas supplier and it is deemed to be an
import of services as per section 5(3) of the IGST Act read with Sl.
No. 1 of NN 10/2017-ITR, then such Hospital is liable to pay IGST
under reverse charge. Thus, as per section 24(iii) of the CGST Act
such hospital is liable to get registration mandatorily.

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But, the issue here is whether section 24 of the CGST Act will
prevail or section 23. Section 24 overrides only section 22(1) of the
CGST Act and not section 23. A logical conclusion can be derived
that section 23 being a specific section provides for exemption from
registration under GST, if the supplier is engaged exclusively in
supply of wholly exempted goods or services, whereas section 24
makes registration compulsory if inward supply of any of the goods
or services is received on which GST is payable under reverse
charge. Thus application of both the sections is independent and it
is a well settled principle of interpretation that the law should not be
interpreted in such a way to make any part of the statute redundant.
If the application of section 23 is adopted then the application of
section 24 becomes redundant. However in the absence of the
specific clarification from the Department, there are possibilities that
the Department may dispute which has to be defended on merits.
Moreover, the only possibility for the Government is to issue a
Notification by virtue of the power conferred in section 23(2) of the
CGST Act. In the past the Government has issued various
Notifications under the said provisions to exempt persons who were
otherwise required to take registration. Until then, on a conservative
approach, it is advisable to take registration under section 24(iii) of
the CGST Act.
Q366. A newly incorporated software company engaged exclusively in
export of software services has not been registered under the
GST law since its inception. Meanwhile the company has raised
invoices for export of software services and received payments
from the overseas customers. The annual turnover of such
software company works out to ` 65 Lakhs. Whether the
software company has to take registration under GST and if so
from which date they have to take registration. Whether they
are liable to discharge GST on such export of services along
with interest?
Ans. Export of services are treated as Inter-State supplies as per
section 7(5) (a) of the IGST Act. Hence, as per section 24(i) of the
CGST Act, the person who is engaged in export of services is
compulsorily required to take registration irrespective of the fact that
such export turnover is less than ` 20 Lakhs. However, by virtue of

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NN 10/2017-ITR as amended by Notification No. 3/2019-Integrated

Tax dated 29.01.2019 read with section 20 of IGST Act and
section 23(2) of the CGST Act, the persons making inter-State
supply of taxable services are being exempted from taking
registration if the aggregate turnover computed on all India basis is
less than ` 20 Lakhs.
Thus, in the given case the software company is liable to get
registration as per section 24(i) of the CGST Act immediately after
their aggregate turnover has exceeded ` 20 Lakhs, as they are
engaged in inter-State taxable supply of services. In fact, only after
obtaining the registration, the software company should have
exported the services under bond or LUT without payment of
integrated tax and can claim refund of unutilised input tax credit as
per section 16(3) (a) of the IGST Act. Alternatively the software
company should have exported the services with payment of
integrated tax and claim refund of such tax paid on services as per
section 16(3) (b) of the CGST Act. But the software company has
neither taken registration nor obtained LUT/Bond for export of
services for ` 65 Lakhs without payment of integrated tax. Now the
question arises as to whether such software company is liable to pay
IGST on supply of software services alongwith interest as specified
under section 50(1) of the CGST Act.
The solution to this issue is that the software company can now
immediately apply for registration and also apply for LUT
immediately through Online in Form GST RFD-11 as per
Rule 96A(1) of the CGST Rules. Once Form GST RFD-11 is filed in
common portal LUT shall deemed to be accepted as soon as an
acknowledgement for the same, bearing the application reference
number (ARN) is generated online. But the dispute here is whether
filing the LUT will ratify the defect of the software company in
exporting services without payment of integrated tax. In this
connection, it is emphasized that the software company would have
fulfilled the following conditions for being export of services as per
Section 2(6) of the IGST Act:
a. Location of supplier (software company) as per section 2(15) of
IGST Act is in India

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Practical FAQ’s under GST

b. Location of recipient (overseas clients) as per section 2(14) of

IGST Act is outside India
c. As per section 13(2) of IGST Act, the place of supply of software
services by the software company shall be the location of the
recipient (overseas clients) which is also outside India
d. Payment for such service was received in convertible foreign
currency
e. The supplier of service being the software company and the
recipient of service being the overseas clients are not merely
establishments of a distinct person in accordance with
Explanation 1 in section 8 of IGST Act.
Once it is concluded as export of services, then it will automatically
be zero rated supply of services as per section 16(1) of the
IGST Act.
Though the software company was not registered at the time when
they supplied software services to their overseas clients but still it
can be concluded as zero rated supply. But the only default is such
zero rated supplies have been made before filing the LUT. For this,
the Board has issued a clarification in Para 4.1 of Circular No.
37/11/2018-GST dated 15.03.2018, where in it has emphasised that
the substantive benefits of zero rating may not be denied where it
has been established that exports in terms of the relevant provisions
have been made. The delay in furnishing of LUT in such cases may
be condoned and the facilities for export under LUT may be allowed
on ex post facto basis taking into account the facts and
circumstances of each case. Though this Circular was superseded
by the Circular No. 125/44/2019-GST dated 18.11.2019, but the
proposition laid by the former Circular still holds good as the same
clarification was reiterated by the Board in Para No. 44 of this
Circular. Hence, it is advisable for the software company to apply
the LUT immediately through Online in the common portal to ratify
the earlier procedural deviation.
Finally the software company need not pay IGST on the supply of
software services along with interest under section 50(1) of the
CGST Act, because non-filing of LUT / Bond is only a procedural
deviation; as the fundamental requirement has been met other

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procedural deviation can be condoned. This view is also upheld by

the Hon’ble Supreme Court in Mangalore Chemicals and
Fertilizers Ltd v. Deputy Commissioner [1991 (8) TMI 83 – SC]
wherein it has been held that the procedural infraction of
Notification, Circulars, etc. are to be condoned if exports have
already taken place and law is settled now that substantive benefit
cannot be denied for procedural lapse.

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 Chapter 10
Returns
Q367. A services provider submits his invoice for outward supply and
on the same day two more invoice are raised, one for SEZ and
another for a party outside India. Thus, there are three invoices.
How to show same in Form GSTR-1?
Ans. As per Rule 59(1) of the CGST Act, outward supplies are required to
be reported in Form GSTR-1.
Invoice wise details are required to be reported in Form GSTR-1.
a. If the domestic customer is registered person, invoice issued to
him needs to be reported in Table 4A of the Form GSTR -1.
b. If the recipient is unregistered person and value of invoice is
more than ` 2.5 Lakhs, then it needs to be reported in Table 5A
of the Form GSTR -1 and
c. If the value of invoice is less than ` 2.5 Lakhs, then it needs to
be reported in Table 7A (Intra State supply) or Table 7B
(Interstate supply) of the Form GSTR -1.
d. Supply to SEZ unit needs to be reported under Table 6B of
Form GSTR -1.
e. Supply to a person outside India,
(i) If it is export supply needs need to be reported under
Table 6A of the Form GSTR -1.
(ii) If it is not an export of service it shall be reported in B2C
Table 7B of the Form GSTR -1.
Q368. How to apply the 10% restriction of credit in terms of Rule 36(4)
of the CGST Rules in case the supplier files return quarterly? Is
it possible to take credit on invoices which are reflected in
Form GSTR-2A in other quarter?
Ans. Rule 36(4) of the CGST Rules, restricts availment of ITC in Form
GSTR-3B to the extent of 110% of matched ITC as available in
Form GSTR-2A. It does not provide for any additional liberty in case
 Returns

of supplier is filing Form GSTR-1 on quarterly basis. Credit can be

availed within the limit of 110% only. In such scenario, if credit is
more than 10% of the available limit, it can be availed only after
reflection of credit in Form GSTR-2A i.e. filing of Form GSTR-1 by
supplier.
Q369. A supplier wrongly reported the supply as unregistered supply
in Form GSTR-1; therefore same is not appearing in Form
GSTR- 2A of the purchaser. Now the purchaser has complied
with all conditions of section 16 of the CGST Act, but same is
not appearing in Form GSTR 2A of the purchaser. Is the
purchaser entitled to claim ITC?
Ans. CBIC has clarified this issue in Para 4 of Press Release No. 62/2018
dated 18.10.2018. Same is reproduced below.
“4. It is clarified that the furnishing of outward details in Form
GSTR-1 by the corresponding supplier(s) and the facility to
view the same in Form GSTR-2A by the recipient is in the
nature of taxpayer facilitation and does not impact the ability of
the taxpayer to avail ITC on self-assessment basis in
consonance with the provisions of section 16 of the Act. The
apprehension that ITC can be availed only on the basis of
reconciliation between Form GSTR-2A and Form GSTR-3B
conducted before the due date for filing of return in Form
GSTR-3B for the month of September, 2018 is unfounded as
the same exercise can be done thereafter also.”
As per the above clarification, credit can be availed by the
purchaser. Further, section 16 of the CGST Act which provides for
eligibility of ITC was envisaged with Form GSTR-2 and Form
GSTR-3 in mind. But the concept of matching and filing of Form
GSTR-2 and Form GSTR-3 have not happened so far. Therefore, if
all the conditions as prescribed under section 16 of the CGST Act
are fulfilled then credit can be availed by the purchaser. He needs to
demonstrate the same during scrutiny.
However, w.e.f. 09.10.2019, Rule 36(4) has been incorporated in the
CGST Rules, restricting availment of ITC in excess of 10% of
matched ITC as reflected in Form GSTR-2A. If subject credit is
more than prescribed limit of 10%, the same cannot be availed.

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Practical FAQ’s under GST

Q370. At the time of GST audit of FY 2018-19, whether the Chartered

Accountant is supposed to check the payment of all invoices of
which credit has been availed during the year, or invoices
pertaining to March 2019 shall be evaluated at the time of audit
of FY 2019-20 as payment is due by September 2019?
Ans. Second proviso to section 16 of CGST Act, prescribes that, in case a
registered person fails to pay to supplier, value of supply along with
tax payable on the same within 180 days from issue of invoice, ITC
related to such non-payment needs to be added to output tax liability
along with interest. This condition needs to be verified at the time of
completion of 180 days from the date of invoice and not at the time
of availment of ITC.
However, it may be noted that CBIC vide press release dated
03.07.2019 has clarified the Role of Chartered Accountant / Cost
accountant in certifying reconciliation statement; accordingly, their
role is limited to reconciliation of value declared in annual return with
audited annual account. The CBIC clarification is re-produced
hereunder for ready reference:
“(h) Role of chartered accountant or a cost accountant in
certifying reconciliation statement: There are apprehensions
that the chartered accountant or cost accountant may go
beyond the books of account in their recommendations under
Form GSTR-9C. The GST Act is clear in this regard. With
respect to the reconciliation statement, their role is limited to
reconciling the values declared in annual return (Form GSTR-9)
with the audited annual accounts of the taxpayer.”
However, since the meaning of the term ‘audit’ as defined under
section 2(13) of the CGST Act, is very wide and audit report in
Form GSTR-9C is to be certified with a ‘true & fair view’, the Auditor
must apply his professional judgment and based on the facts of the
case, verification can be done applying the various principles of
auditing viz., materiality, subjectivity, objectivity etc.
Hence, it would be pertinent to verify payment of invoices pertaining
March 2019 also to check if the same has been done within
180 days. If not done, whether such ITC has been reversed / added
to liability shall have to be reported. If such data could not be
verified then that fact should also be reported.

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Q371. While filing Form GSTR-9, what should be the treatment of the
difference in ITC as per Form GSTR-2A and Form GSTR -3B?
Ans. As clarified earlier in Q No. 369, upto 09.10.2019, reflection of ITC in
Form GSTR-2A, was not a condition for availment of ITC. Therefore,
there is only reporting requirement of difference between Form
GSTR-3B and Form GSTR-2A in Form GSTR 9, if credit is
otherwise availed as per prescribed conditions. The legal
requirement of matching with Form GSTR-2A has arisen only from
financial year 2019-20.
Q372. While filing Form GSTR-3B, if the ITC was reflected in Form
GSTR 2A, but the supplier later made amendment, how to
satisfy this condition.
Ans. If the supplier has revised Form GSTR-1 to rectify his mistake, it
indicates, credit was availed wrongly by the purchaser. In such a
case, credit needs to be reversed. If credit was availed as per
prescribed provisions, follow up needs to be taken with the supplier
for re-correcting Form GSTR-1.
Q373. A Pharmacy is supplying medicines to a hospital. In the month
of March, the pharmacy receives a debit note from the hospital.
The value of the debit note exceeds the total sales of the
pharmacy in the month of March. What should be the treatment
of such turnover vis-à-vis the debit note in Form GSTR-1?
Ans. As per section 34 of the CGST Act, credit or debit note shall be
raised only by a supplier. The retail chemist (supplier) shall have to
raise a credit note corresponding to the debit note from the
hospital. This credit note shall be reported in the Form GSTR-1. In
Form GSTR-3B, such credit notes shall have to be reduced from the
taxable value and net value shall have to be reported.
In the given situation, since the taxable value for March is lesser
than the credit note amount, results in negative numbers the same
shall not be reported in Form GSTR-3B. Circular No. 26/26/2017-
GST dated 29.12.2017 – Para 4 states: “It may be noted that while
making adjustment in the output tax liability or input tax credit, there
can be no negative entries in the FORM GSTR-3B. The amount

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Practical FAQ’s under GST

remaining for adjustment, if any, may be adjusted in the return(s) in

FORM GSTR-3B of subsequent month(s) and, in cases where such
adjustment is not feasible, refund may be claimed.”
In line with the above circular such negative numbers shall be
adjusted against the subsequent period’s liability.
Q374. In case where Form GSTR-1 is uploaded by supplier after due
date, in which month the transactions would appear in Form
GSTR-2A of his customer.
(a) the month in which Form GSTR-1 is uploaded by supplier or
(b) the month as per date of bill for which Form GSTR-1 is
uploaded.
Ans. Say a bill dated 5th May is reported in Form GSTR-1 in of May itself
but Form GSTR-1 is filed late (i.e. it is filed on 7th July as against
11h June), then the said bill will be updated in Form GSTR-2A of
May month of the customer.
However, if the bill dated 5th May is reported in Form GSTR-1 of
June month, then the said bill will be updated in Form GSTR-2A of
June month of the customer.
Q375. During the course of the GST audit it was observed that the
taxable person (auditee) had not paid his creditors within 180
days but paid on or before 31.03.19, being an auditor, we
observed that taxable person has not complied with the second
proviso to Section 16(2). Accordingly, ITC availed should be
reversed but auditee is not ready for such reversal since the
amount is already paid as on the balance sheet date; what
should the auditor do in this case and how shall he report in
Form GSTR-9C.
Ans. In the given situation, say the bill is dated 1st May 2018 which is paid
on 5th March 2019. As on 31st March 2019, bill has been paid and
hence supplier is eligible for claiming set-off. However, legally the
supplier should have reversed the same in the month of November
(month following the end of period of 180 days i.e. 27th October) and
eligible to claim set-off in month of March 2019.

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Hence, the auditor shall ensure that interest for the November to
March is paid for wrong availment of ITC along with interest for the
period May to October as per second proviso to section 16(2) of the
CGST Act and report this through comments in Part II of Form
GSTR-9C.
Q376. Form GSTR-3B for the month of March is to be filed by
22nd April whereas Form GSTR-1 quarterly return is to be filed
by 30th April. Accordingly, the transaction would not appear in
Form GSTR-2A by 22nd April. In such cases how to claim the
credit?
Ans. As per Circular No. 123/42/2019-GST, dated 11.11.2019, the
taxpayer has to ascertain ITC reported by suppliers from his auto
populated Form GSTR-2A as available on the due date of filing of
Form GSTR-1 under sub-section (1) of section 37 of the CGST Act.
However, the guidance provided under this circular will fail in the
given case as the date of filing of Form GSTR-3B is earlier than the
due date of Form GSTR-1 and hence the conservative and practical
approach will be to consider Form GSTR-2A as on the date of filing
of Form GSTR-3B.
Q377. How to check whether the taxes are actually paid by the
supplier as he might have filed Form GSTR-1 but not filed Form
GSTR-3B and there is no tool to check whether the supplier has
filed Form GSTR-3B
Ans. GSTN portal provides for “Filing table” of supplier through search
taxpayer facility. The same can also be accessed in bulk through
various GSP’s.
However, one must consider that filing of Form GSTR-3B may not
be conclusive evidence of payment of tax on respective supplies by
the supplier and taxpayer shall take appropriate precautions against
their suppliers to safeguard against any future liability regarding
set-off of ITC in respect of the said supply.
Q378. For computing the net tax liability, the taxpayer has to take
Form GSTR-2A of due date of Form GSTR-1 i.e. 11th of following
month. Please guide.

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Practical FAQ’s under GST

Ans. Due date of filing of Form GSTR-1 i.e. 11th of the following month
as per Sl No 3 of point 3 of Circular No. 123/42/2019-GST, dated
11-11-2019.
Q379. Do we have to include value of supply liable to reverse charge
while filing Form GSTR-3B?
Ans. According to section 17(3) of the CGST Act, outward supplies, on
which the recipient is liable to pay tax on reverse charge basis, shall
be treated as exempt supplies for the purpose of section 17(2) read
with rule 42 /43 of the CGST Rules.
A view may be taken that supplies on which the recipient is liable to
pay tax on reverse charge basis, shall be treated as exempt supplies
only for the purpose of section 17(2) and not for any other purpose.
However, considering reconciliation and reporting purpose in Annual
returns among others, the following disclosure may be considered:
[This could be discussed from the perspective of both suppliers and
as well recipient]
Supplier of RCM Services/goods: Registered person supplying
specific goods and/or services where tax has to be paid on reverse
charge basis by the recipient, the taxable value of such supplies
shall be reported by the supplier in Table 3.1 (c) of Form GSTR-3B.
Recipient of RCM Services/goods: Inward supplies liable to
reverse charge will have to be reported by the recipient in Table
3.1(d) and (where ITC is claimed) in Table 4A(3) of Form GSTR 3B
by the recipient.
Q380. A person is providing outward supplies which are taxable
under RCM. Where to declare these outward supplies in
Form GSTR-3B?
Ans. The declaration should be made in Table 3.1(a) which covers
outward taxable supplies (other than zero rated, nil rated and
exempted)
As per section 2(108) of the CGST Act, “taxable supply” means a
supply of goods or services or both which is leviable to tax under
this Act. Further outward supplies on which tax is payable are not
covered under zero rated supplies, exempt supplies as per

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section 2(47) of the CGST Act, or nil rated supplies. Hence, these
shall be covered in Table 3.1(a).
Q381. ITC accounted for in the books of accounts but not claimed in
Form GSTR 3B. Same was claimed in Form GSTR-3B of October
month of next financial year. Is the taxable person eligible to
claim ITC?
Ans. No, As per section 16(4) of the CGST Act, a registered person shall
not be entitled to take ITC in respect of any invoice or debit note for
supply of goods or services or both after the due date of furnishing
of the return under section 39 of the CGST Act, for the month of
September following the end of financial year to which such invoice
or invoice relating to such debit note pertains or furnishing of the
relevant annual return, whichever is earlier.
Example – ITC set-off to be claimed ` 12 lakhs of FY 2019-20

Claimed ` 12 Return of the Due date of Whether

lakhs or partial said month GSTR-3B of set-off is
amount through filed on September 2020 Available
GSTR-3B of (Assumed) as per law
April 2020 20/06/2020 20/11/2020 Yes
September 2020 18/11/2020 20/11/2020 Yes
April 2020 25/11/2020 20/11/2020 No
October 2020 15/11/2020 20/11/2020 Yes
October 2020 25/11/2020 20/11/2020 No

Assuming Annual Return for FY 2019-20 is filed on 4th December,

2020.
Q382. Due to entry error total outward taxable supplies [Table 3.1 (a)]
has been entered in inward supplies (liable to reverse charge).
How can I rectify the same?
Ans. In Form GSTR-3B manual entry has to be made which has no
inbuilt checks and balances by which it can be ensured that the data
uploaded by each registered person is accurate, verified and
validated.

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The following remedies are available:

1. Submit a rectified Form GSTR-3B manual copy with a covering
letter to the Jurisdictional Officer and also to the Nodal Desk
Officer.
2. Raise a ticket to GST portal
3. Rectify the same if possible in Form GSTR-9, since your
outward supply will be reflected there.
4. Also if you are under GST Audit, the comment for same should
be mentioned in GST Report, so that it will be helpful, for any
reply to Show Cause Notice by the Department.
For filing Manual Form GSTR-3B with Nodal Desk Officer you may
quote Bharti Airtel Limited v. Union of India and Ors. [W.P. (C)
6345/2018, CM APPL. 45505/2019 decided on 5-5-2020]
Q383. (a) Financial year 2017-18 audit was conducted by some other
CA and for F Y 2018-19 the audit is to be conducted by us.
As per Rule 37 of the CGST Rules, (180 days payment) if
opening balance is outstanding as on 1.4.2018 and 180 days
expires during FY 2018-19. Whether we have to report now
in FY 2018-19 as there was no input available in financial
year 2018-19 and no amount to reverse as per Rule 37 of the
CGST Rules.
(b) If any sale of 2017-18 is declared in financial year 2018-19
and is reflected in annual return of 2017-18 in columns 10
and 11. Where will this amount be reflected in the annual
return for FY 2018-19?
Ans. (a) If ITC was reversed in the year 2017-18 and the amount is still
not paid in the year 2018-19, no credit is required to be taken; if
the amount is paid during the year 2018-19 then credit for the
reversed ITC can be taken. Once credit is taken and later
reversed due to rule 37 of the CGST Act, the time-limit under
section 16(4) of the CGST Act would not bar it from taking credit
again when payment is made later on. In respect of amounts
outstanding as on 01.04.2018, and the period of 180 days
expires during 2018-19, the ITC originally taken in respect of
such outstanding is to be reversed with interest on the expiry of
180th day and it can be reclaimed when the payment is made.

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(b) With regard to second question, there is no column in GSTR-9

of annual return, where we can put reconciliation outward
liability figure which we have reported in the year 2017-18
annual return in tables 10 and 11.
CBIC VIDE Press Release dated 09th October, 2020 had
clarified that the taxpayers are required to report only the values
pertaining to Financial Year 2018-19 and the values pertaining
to Financial Year 2017-18 which may have already been
reported or adjusted are to be ignored. No adverse view would
be taken in cases where there are variations in returns for
taxpayers who have already filed their GSTR-9 of Financial Year
2018-19 by including the details of supplies and ITC pertaining
to Financial Year 2017-18 in the Annual return for FY 2018-19.
However, it is adviced to keep your working papers ready. If you
receive SCN from Department, you can very well inform the
proper officer with your working paper and satisfy him.
Q384. What is the late fee for annual return Form GSTR 9? Is it `
50,000 (25k + 25k) under section 125 of the CGST Act or it is
levied under section 47 thereof?
Ans. Sub-section (2) of section 47 of the Act provides for levying late fees
on those registered persons who failed to furnish the annual return
in Form GSTR 9 by the due date. The late fee prescribed is as
follows:
Quantum CGST SGST
Minimum ` 100.00 for every day ` 100.00 for every day
during which the failure during which the failure
continues. continues.
Maximum Quarter per cent of his Quarter per cent of his
turnover in the State or turnover in the State or
Union territory. Union territory.
The registered person, who is required to get his accounts audited
following the provisions of sub-section (5) of section 35 read with
rule 80, has to furnish the annual return in Form GSTR 9 along with
a copy of the audited annual accounts and a reconciliation statement
in Form GSTR 9C. It is pertinent to note that in cases where the
aggregate turnover exceeds the limit prescribed under rule 80 (3)

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Practical FAQ’s under GST

the registered person has to submit the annual return along with
audited accounts and a reconciliation statement within the due date.
Late fee is levied for furnishing the annual return beyond the
prescribed time.
Section 125 of the CGST/ SGST Act, imposes a penalty (not late
fees) on any person, who contravenes any of the provisions of this
Act or any rules made thereunder for which no penalty is separately
provided for in this Act. The penalty may extend to ` 25,000/- each
under CGST & SGST/UTGST Act.
Where the registered person fails to comply with the above-referred
provisions, there is no separate penalty provided under the
CGST/SGST Act. Hence, if a registered person fails to comply with
any of the above provisions i.e., fails to get its books of accounts
audited by CA or CMA OR submit the annual return along with
audited accounts and a reconciliation statement within the due date,
he shall be liable to a penalty under section 125.
Q385. There is no separate table to show the outward sales on reverse
charge in Form GSTR-3B. Whether there is a necessity to show
the same in Form GSTR-3B? If the answer is yes, then under
which table of Form GSTR 3B the same is to be shown? For
Example: Transporter "A" opts for 12% GST. Receiver B will
remit the tax" on reverse charge basis and he will show the
same under reverse charge in Form GSTR-1. Explain.
Ans. It can be shown under Table 3.1 (c) - Other outward supplies (Nil
rated and exempted).
In Form GSTR-1 there is a Table 4B to show such entries. It
provides “whether invoice is under reverse charge mechanism”.
Once a supplier mentions “Yes” against the column, it implies that
the tax payment has to be done by receiver. It is reflected in
Form GSTR-2A as RCM invoice where the recipient needs to pay
tax. One thing, we need to keep in mind while doing GST Audit, is
that the auditor should also look for Form GSTR-2A for the above
kind of entry and if found, enquiry need to be done whether tax
under RCM has been paid or not.

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For transporters there are two options, one is paying on forward

charge which is 12% with ITC and the other is under RCM where the
recipient is required to pay tax @ 5%. The transporter opting for
12% GST, has to pay the GST under forward charge. RCM is not
applicable in such cases.
Q386. What will be the effect of amendment to Rule 36(4) of the CGST
Rules, allowing 10% provisional credit made on 03.04.2020 viz,
how to ensure compliance on cumulative basis in September
2020 returns?
Ans. Rule 36(4) restricts availment of ITC in Form GSTR-3B to the extent
of 110% of matched eligible ITC as available in Form GSTR-2A.
A proviso was inserted by Notification No. 30/2020-Central Tax
dated 03.04.2020, to this rule. As per the proviso the condition of
110% shall be applicable on cumulative basis for the period
February to August 2020 and return for the period September 2020
shall be furnished giving effect of cumulative adjustment of ITC.
Further, Circular 136/06/2020-GST dated 03.04.2020, clarifies the
scope of the above proviso. As per the circular, a proviso has been
inserted in the CGST Rules, to provide that the said condition shall
not apply to ITC availed by the registered persons in the returns in
Form GSTR-3B for the months of February, March, April, May,
June, July and August, 2020, but that the said condition shall
apply cumulatively for the said period and that the return in
Form GSTR-3B for the tax period of September, 2020 shall be
furnished with cumulative adjustment of ITC for the said months
in accordance with the condition under Rule 36(4) of the CGST
Rules.

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Practical FAQ’s under GST

Examples:
CASE-A
` in Lakhs
Particulars Credit Credit Credit Credit to be
claimed as per as per reversed in
in Form Form Rule September
GSTR- GSTR- 36(4) – 2020- return
3B 2A 110% of
Form
GSTR-
2A
Cumulative 130 100 110 20 = 130 –
Credit for the 110
period February
to August 2020
As per proviso to Rule 36(4) of the CGST Rules, ITC of ` 130 Lakhs
can be availed in Form GSTR-3B for the period February to August
2020, whereas, as per Rule 36(4) of the CGST Rules, 110% of
matching credit in Form GSTR-2A can be availed. As ` 100 Lakhs
is matching credit as per Form GSTR-2A, maximum `110 lakhs
credit can be availed for the period February to August 2020.
Therefore, excess credit availed to the tune of ` 10 Lakhs needs to
be reversed in Form GSTR-3B for the month of September 2020.
CASE-B
` in Lakhs
Particulars Credit Credit Credit as Credit to be
claimed as per per Rule reversed in
in GSTR 36(4) – September
GSTR- 2A 110% of 2020- return
3B GSTR-2A
Cumulative 130 120 132 NIL
Credit for the
period February
to August 2020

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As per proviso to Rule 36(4) of the CGST Rules, ITC of ` 130 Lakhs
can be availed in Form GSTR-3B for the period Feb to August
2020.Whereas, as per Rule 36(4), 110% of matching credit in Form
GSTR-2A can be availed. As ` 120 Lakhs is matching credit as per
Form GSTR-2A, maximum ` 132 lakhs credit can be availed for the
period February to August 2020. As actual availment of ITC is lesser
than maximum limit of `132 Lakhs, no adjustment is required to be
done in Form GSTR-3B for the month of September 2020.
If the unmatched ITC pertains to February & March 2020, then in
any case the eligibility to avail ITC for the financial year 2019-20
shall cease from the due date of filing Form GSTR-3B for
September 2020.
Q387. Whether input GST for FY 2017-18 can be claimed now? If no,
whether the output GST can be reversed?
Ans. As per proviso to section 16(4) of the CGST Act, read with Removal
of Difficulty Order No. 02/2018- Central Tax dated 31.12.2018, the
time limit to avail ITC relating to financial year 2017-18 is the due
date for filing Form GSTR-3B of March 2019. Therefore, Input GST
for FY 2017-18 cannot be availed post that date.
Output GST cannot be reversed if ITC is not available. Output tax
liability arises from the levy and can be recovered by the
Department under the provisions of section 73 or 74 of the
CGST Act.
On the other hand, ITC is a vested right of the tax payer which has
to be availed and utilized by the tax payer subject to the provisions
of Chapter V of the CGST Act relating to ITC.
Non availability of ITC does not waive the GST liability.
Q388. Should transactions made by an Indian company's branch
offices located outside India be reported in the GST returns of
the company under exempted/nil rated supplies?
Ans. The GST returns require details of the outward and inward supplies
made by that particular registered person only. The transactions
undertaken by the foreign branch of the Indian entity shall not be
required to be reported in the GST returns. However, the supplies
made by the Indian entity to the foreign branch or vice versa will be
required to be reported by the Indian entity.

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Q389. (a) Are interest on fixed deposits, high-seas sale and MEIS
license sale to be considered as taxable supply or as
exempt supply?
(b) What are the consequences of and the course of action to
be taken if fixed deposit interest and high-seas sales have
been reported wrongly as taxable turnover in Form GSTR-9
& Form 9C and if the taxable supplies of MEIS license sale
have not been included in the taxable turnover in Forms
GSTR-9 & 9C?
Ans. (a) Interest on FD: Interest on fixed deposits is exempt in terms of
NN 12/2017-CTR.
High sea sale: High sea sale is treated neither as a supply of
goods nor supply of services as per an insertion in Schedule III
of the CGST Act vide the CGST (Amendment) Act, 2018 with
effect from 1-02-2019. Hence, it is not at all regarded as supply
under GST.
MEIS license sale (sale of duty credit scrip): Sale of duty credit
scrip was taxable till October 12, 2017. Subsequently the same
has been exempted vide Notification No. 35/2017 Central tax -
(Rate) dated 13.10.2017. All are considered as exempted
supply, as non-taxable supply is part of exempt supply.
(b) Once the annual return in Form GSTR-9 and Form GSTR 9C
are filed, the same cannot be revised. In case the above
mentioned supply was omitted to be considered or wrongly
considered based on the impact of such omission, or where it is
huge, the supplier may make an intimation for the same
to the jurisdiction officer, through a letter about such
omission. Similarly, if any tax payable arises even after filing
Form GSTR-9 and Form GSTR 9C, the same can be
determined by the taxable person and the determined tax be
paid through Form GST DRC-03 and the same be intimated to
the jurisdictional Proper Officer.

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 Chapter 11
Interest
Q390. A tax payer had paid less tax on supplies made in March, 2018
in the regular return filed on 20th April, 2018. Later on he
deposited the due tax in the month of May, 2018 through a
regular challan and that amount was lying in cash ledger and
was not utilised until the tax payer filed the return in FORM
GSTR-9C in February, 2020. Later he filed FORM GST DRC-03
and paid a very small amount in cash. Whether interest would
be charged from March, 2018 till February, 2020 on the gross
amount of tax due or on the balance amount paid by him in
February, 2020?
Ans. The interest is to be paid on cash component only from March, 2018
till February, 2020. This issue is not free from litigation. A proviso
was inserted after section 50(1) through Finance Act, 2019 to the
effect that interest is to be levied on cash component only.
However, the proviso was not notified.
The proviso was made effective through Notification No. 63/2020-
Central Tax, dated 25.08.2020 [“NN 63/22020-CT”], prospectively
w.e.f. 1st September, 2020.
Now, the issue arises to whether the interest already paid on gross
liability will become refundable and what about the liability to interest
that accrues prior to 1st September, 2020. To mitigate the issues as
such and to avoid the refund claims the Board issued a press
release dated 26th August, 2020, stating that NN 63/22020-CT,
relating to interest on delayed payment of GST has been issued
prospectively due to certain technical limitations. However, it has
assured that no recoveries shall be made for past period as well by
the Central and State Tax Administration in accordance with the
decision taken in the 39th Meeting of GST Council. This will ensure
full relief to the tax payers as decided by the GST Council.
Further, in the case of Refex Industries Ltd. v. Asstt.
Commissioner of CGST, W.P. No. 23360 of 2019, decided on
6-Jan-2020 and in the case of Mannsarovar Motors (P) Ltd. v.
Asstt. Commissioner of CGST, WP No. 4468 of 2020, decided on
Practical FAQ’s under GST

20-Sep-20, the Hon’ble Madras High Court held that amendment in

section 50 is of clarificatory nature and interest should be levied only
on the cash component.
The above question is to be clarified by the Board, through circular,
or through necessary retrospective amendment wherever required
through/ by Government.
Q391. If payment is not made by the recipient of inward supply to the
supplier as provided under section 16(2)(d)(second Proviso) of
the CGST Act within 180 days from the date of issue of invoice
then from which date interest on delayed payment of tax
claimed as ITC on such inward supply is to be calculated? How
to reverse the credit?
Ans. As per rule 37(3) of the CGST Rules ‘the registered person shall be
liable to pay interest at the rate notified under sub-section (1) of
section 50 for the period starting from the date of availing credit on
such supplies till the date when the amount added to the output tax
liability, as mentioned in sub-rule (2), is paid’.
So, effectively interest is to be paid from the date of filing of return of
the month in which the relevant ITC has been availed up to the date
of filing of return of the month in which the relevant ITC is reversed.
The credit shall be reversed as per rule 37(2) of the CGST Rules
which reads:
‘The amount of input tax credit referred to in sub-rule (1) shall
be added to the output tax liability’ for the month in which details
are furnished.”
The recipient needs to reverse such ITC in Form GSTR-3B
Table 4.B under the column titled ‘Others’.
Q392. Interest for not filing return should be considered as ‘Nil’ when
there is no liability on the assessee for the particular
month/quarter. Please clarify.
Ans. Section 50 (1) of the CGST Act says:
“Every person who is liable to pay tax in accordance with the
provisions of this Act or the rules made thereunder, but fails to
pay the tax or any part thereof to the Government within the
period prescribed, shall for the period for which the tax or any
part thereof remains unpaid, pay, on his own, interest at such

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 Interest

rate, not exceeding eighteen per cent., as may be notified by the

Government on the recommendations of the Council:”
In view of the above, there is no interest liability in the above case
as tax payable is NIL. It is presumed that outward taxable turnover is
NIL for the particular month / quarter. In case outward taxable
liability is set off completely by ITC then the answer to question no.
390 may be referred.
Q393. If we paid GST through challan before due date but filed FORM
GSTR 3B after due date, whether we have to pay interest?
Ans. Yes, in view of section 50 of the CGST Act, interest is payable from
the due date to the date of payment. Rule 85(3) & (4) of the CGST
Rules, further specifies that payment shall be made by debiting
cash/credit ledger which happens on filing of FORM GSTR-3B.
Hence interest is payable.
Example –
Outward tax liability – ` 5 Crore
ITC set off available – ` 2.7 Crore
Tax to be paid – `2.3 Crore
Due date of filing FORM GSTR-3B – 22nd April 2019
Tax paid – ` 1.2 crore on 21st April 2019
Tax paid – `1.1 crore on 29th April 2019
Form GSTR-3B filed on 30th April 2019
In this case, interest is payable on ` 2.3 crore from 23rd April to 30th
April.
Q394. What is the rate of GST on interest paid by the recipient for
delayed payment of consideration? Should we apply the rate
applicable to concerned goods or services or 18%
Ans. The value of supply shall include as per section 15(2) (d) ‘interest or
late fee or penalty for delayed payment of any consideration for any
supply’
Hence the interest received will be taxed at the rate applicable to
original supply. However, the time of supply shall be the date on
which interest is received as per sections 12(6) and 13(6) of the
CGST Act.

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Practical FAQ’s under GST

Q395. Bills raised during October, 2020 erroneously omitted in

Form GSTR-1 and a Nil Return has been filed. During November,
2020 the bills raised during October 2020 were shown. In this
scenario, whether interest is to be paid and if so, at the rate of
18% or 24%?
Ans. Interest is to be paid for outward tax liability according to
section 50(1) of the CGST Act which is 18% for the period from the
due date of filing Form GSTR-3B till the date when the liability is
discharged. For payment of interest reporting in Form GSTR-1 is not
a criterion. Interest is required to be paid when the said transaction
is not included in Form GSTR-3B and because of that tax has not
been paid for the said transaction. If the above transaction is not
included in Form GSTR-3B for the month of October, 2020 and
included in Form GSTR-3B in any subsequent month, interest is to
be paid for the period from the due date of filing Form GSTR 3B for
the month of October, 2020 till the date when such transaction is
reported.
Q396. Whether interest is payable on excess claim of ITC?
Ans. As per section 50(3) of the CGST Act a taxable person who makes
an excess claim of ITC under section 42(10) thereof, shall pay
interest on such excess claim at such rate not exceeding 24%.
However, since Form GSTR-2 and Form GSTR-3 are deferred,
section 50(3) may not be operational and therefore, interest may not
be applicable on ITC claimed but not utilised. It is important to note
that Section 50(3) refers to Sub-section (10) of Sections 42 and 43
which deal with matching, reversal and reclaim of ITC and output tax
liability through Form GSTR-1, 2 and 3, and since the Form GSTR-2
and 3 returns have been deferred, the matching system of Form
GSTR-1, 2 and 3 never saw the light of day.
Can we thus say that section 50(3) is majorly inapplicable? With that
understanding it would be safe to interpret that the application of
24% rate of interest on any default is not in place. At the same time,
the department and some experts are of the view that in cases like
excess claim of credit, where the rectification has not been done
within the due date, as stated in Section 39(9) of the Act, interest
would be applicable @24%. This issue also needs some clarification
or interpretation by Court, to settle.

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 Chapter 12
Refunds
Q397. Whether GST paid to Customs House Agent and RCM on
transportation of extra neutral alcohol (“ENA”) being VAT item
in Punjab and Haryana States purchased against Form H and
exported, eligible for refund?
Ans. ENA is a disputable item as to whether it is taxable under GST or
not. For instance, it is considered to be taxable under GST in the
State of Tamil Nadu.
Notwithstanding the above, as per Section 16(2) of IGST Act, input
tax credit can be availed even for making exempt supplies as long
as it can be considered a zero rated supply. Export of ENA is a
zero-rated supply. Section 2 (47) of the CGST Act defines exempt
supply as inclusive of non-taxable supply.
From the above it is clear that whether ENA is considered as non-
taxable or as taxable under GST, if it is exported, it becomes zero
rated supply. Thereby, it enables the right to avail ITC relevant to it
and consequently refund can also be obtained, subject to fulfilment
of the requirements of section 54 of the CGST Act and relevant rule
of the CGST Rules.
Q398. What is the procedure for claiming refund of unutilized ITC on
export of software services without payment of IGST?
Ans. A person claiming refund of any tax, interest, penalty, fees or
any other amount paid by him, may file an application in,
Form GST RFD-01 electronically. It may be noted that refund claim
for a tax period may be filed only after furnishing all the returns in
Form GSTR-1 and Form GSTR-3B which were due to be furnished
on or before the date on which the refund application is being filed.
Such person can make an application in this regard to the proper
officer of IGST/CGST/SGST/UTGST before the expiry of two years
from the relevant date in the prescribed form and manner.
Practical FAQ’s under GST

Relevant date in case of refund of unutilized input tax credit means,

date of receipt of convertible foreign exchange or date of issuance of
invoice which is later.
Procedure:
Standard guidelines have been issued for the purpose of claiming a
refund.
i) An applicant has to file Form GST RFD-01 online on the
common portal along with following documents/statements/
undertaking and certificates:
a) Statement containing Invoice no, date and amount and
supported by copy of FIRC
b) Form GSTR- 2A for relevant period of refund
c) Statement of Invoices in Annexure-B
d) Upload copies of BRC/FIRC, Import Bill of Entries, RCM
Inward Self Invoices and ISD Invoices
ii) Such application will be forwarded to the proper officer for
scrutiny and verification of the completeness of the application
and if application is satisfactory, an acknowledgment in
Form GST RFD-02 will be issued and in case of any
discrepancy observed then, the proper officer shall issue a
deficiency memo in Form GST RFD-03 to the applicant.
iii) Refund Amount = (Turnover of zero-rated supply of goods/
Services) x Net ITC ÷ Adjusted total turnover
a) “Refund” means the maximum refund that is admissible;
b) “Net ITC” means input tax credit availed on inputs, input
services during the relevant period;
c) “Turnover of zero-rated supply of services” means the value
of zero-rated supply of services made without payment of
tax under bond or LUT calculated in the following manner,
namely:-
Zero-rated supply of services is the aggregate of the payments
received during the relevant period for zero-rated supply of services

332
 Refunds

where supply has been completed for which payment had been
received in advance in any period prior to the relevant period
reduced by advances received for zero-rated supply of services for
which the supply of services has not been completed during the
relevant period.
a) “Adjusted total turnover” means the turnover excluding the value
of exempt supplies other than zero-rated supplies, during the
relevant period
b) Relevant period means the period for which the application for
refund has been filed.
CBIC vide Circular No. 135/05/2020 dated 31.03.2020 has decided
that the refund of accumulated ITC shall be restricted to the ITC as
per those invoices, the details of which are uploaded by the supplier
in FORM GSTR-1 and are reflected in the FORM GSTR-2A of the
applicant.
CBIC vide Circular No 139/09/2020-GST dated 10.06.2020 has
clarified that ITC relating to imports, ISD invoices and the inward
supplies liable to reverse charge (RCM supplies) will continue to be
same as it was before the issuance of Circular No. 135/05/2020-
GST dated 31.03.2020.
Q399. In case of inverted tax refund for a unit in a garment industry,
whether ITC on stock lying as on 31.07.18 would lapse or we
can claim refund or utilise the same in subsequent period?
Ans. Notification No. 20/2018-Central Tax (Rate), dated 26.07.2018
[NN 20/2018-CTR] is the concerned notification for this discussion.
This notification amends the original Notification 5/2017- Central Tax
(Rate), dated 28.06.2017 [NN 5/2017-CTR], which deals with the
goods or services for which are ineligible for inverted duty structure
refund. Garment and related products were covered under
NN 5/2017-CTR, which have been removed from this notification by
virtue of NN 20/2018-CTR. This had made these products eligible for
claiming inverted duty structure refund under Section 54 (3) of the
CGST Act.
As per NN 20/2018-CTR, “in respect of said goods, the accumulated
input tax credit lying unutilised in balance, after payment of tax for

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Practical FAQ’s under GST

and upto the month of July, 2018, on the inward supplies received
up to the 31st day of July 2018, shall lapse.”
It can be construed from above, would indicate that any unutilized
balance standing on 31st July 2018 shall have to be foregone
(lapse).
Q400. Whether ITC is available on job charges in case of grey fabric.
Whether excess ITC is refundable under the inverted tax
structure?
Ans. Rule 89(5) of the CGST Rules, prescribes the formula for calculating
refund on account of inverted duty structure. In that formula, the
‘Net ITC’ to be considered for refund has been defined as the ITC
pertaining only to ‘Inputs’. Hence, ITC, arising out of any input
service or capital goods are not eligible for refund. In this case, the
job work charges are in the nature of input service and are not
eligible for refund.
Q401. Whether RCM on freight is applicable to the dealer of exempt
supplies? If paid by mistake, whether claim for refund on such
wrongly paid RCM available?
Ans. Section 9(3) of the CGST Act, levies tax under RCM for notified
goods and services. Accordingly, CBIC vide NN 13/2017-CTR has
notified those services on which recipient of services is required to
pay tax, which includes services of GTA received by the following
persons:
(a) any factory registered under or governed by the Factories Act,
1948; or
(b) any society registered under the Societies Registration Act,
1860 or under any other law for the time being in force in any
part of India; or
(c) any cooperative society established by or under any law;
(d) any person registered under CGST/IGST/SGST/UTGST Act; or
(e) any body corporate established, by or under any law; or
(f) any partnership firm whether registered or not under any law
including association of persons; or
(g) any casual taxable person located in the taxable territory.

334
 Refunds

Section 23 of the CGST Act, exempts the person from taking

registration if such person is engaged exclusively in the business of
supplying goods or services or both that are not liable to tax or
wholly exempt under the CGST Act or IGST Act.
However, as per section 24(iii) of the CGST Act, compulsory
registration is required if a person is required to pay tax under
reverse charge.
Thus even, if a person is engaged in providing exclusively exempt
supplies (Goods/services), he will be required to take registration, if
he is the recipient as per NN 13/2017-CTR i.e., recipient of GTA
services in instant case.
An Exemption Notification [NN 12/2017-CTR], lists out situations
under which the GTA services would be exempt. These are specified
in Sl. No. 21, 21A & 21B of the Notification. viz.
“Sl. No 21: Services provided by a goods transport agency, by
way of transport in a goods carriage of –
(a) agricultural produce;
(b) goods, where consideration charged for the transportation
of goods on a consignment transported in a single carriage
does not exceed one thousand five hundred rupees;
(c) goods, where consideration charged for transportation of all
such goods for a single consignee does not exceed rupees
seven hundred and fifty;
(d) milk, salt and food grain including flour, pulses and rice;
(e) organic manure;
(f) newspaper or magazines registered with the Registrar of
Newspapers;
(g) relief materials meant for victims of natural or man-made
disasters, calamities, accidents or mishap; or
(h) defence or military equipments.
Sl.No. 21A: Services provided by a goods transport agency to
an unregistered person, including an unregistered casual
taxable person, other than the following recipients, namely:—

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Practical FAQ’s under GST

(a) any factory registered under or governed by the Factories

Act, 1948 (63 of 1948); or
(b) any Society registered under the Societies Registration Act,
1860 (21 of 1860) or under any other law for the time being
in force in any part of India; or
(c) any Co-operative Society established by or under any law
for the time being in force; or
(d) any body corporate established, by or under any law for the
time being in force; or
(e) any partnership firm whether registered or not under any
law including association of persons;
(f) any casual taxable person registered under the Central
Goods and Services Tax Act or the Integrated Goods and
Services Tax Act or the State Goods and Services Tax Act
or the Union Territory Goods and Services Tax Act.
Sl.No. 21B: Services provided by a goods transport agency, by
way of transport of goods in a goods carriage, to,—
(a) a Department or Establishment of the Central Government
or State Government or Union territory; or
(b) local authority; or
(c) Governmental agencies,
which has taken registration under the Central Goods and
Services Tax Act, 2017 (12 of 2017) only for the purpose of
deducting tax under section 51 and not for making a taxable
supply of goods or services.”
If any of the above exemptions are applicable, then such supplier of
exempt supplies is not expected to pay GST under reverse charge
on GTA services.
Thus, if GTA services are used for exempted supply of
goods/services, other than the above exempted, RCM would be
applicable and no refund can be claimed against such payment.

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 Refunds

Q402. Whether GST paid at concessional rate of 0.10% for export of

goods is eligible for refund? If yes, then under which category it
should be claimed?
Ans. Refund of such tax can be claimed as per the provisions of
section 54(3) of the CGST Act read with rule 89(2) (h) of the CGST
Rules, electronically by submitting Form GST RFD-01.
CBIC vide Para no 59 of Circular No.125/44/2019-GST dated
18.11.2019 has clarified that supply of export under concessional
rate as per Notification No. 40/2017 – Central Tax (Rate) and
Notification No. 41/2017 – Integrated Tax (Rate) both dated
23.10.2017, will also be eligible for refund on account of inverted tax
structure as per the provisions of section 54(3) of the CGST Act.
Q403. Whether a dealer who has already paid late fees at the time of
submission of Form GSTR-1 return, can claim refund of such
late fees being waived vide Notification No. 74/2019 – Central
Tax, dated 26.12.2019 for the period of July 2017 to
November 2019.
Ans. Section 47 of the CGST Act, levies a late fees on any registered
person who fails to furnish return of outward supply (Form GSTR -1)
within the specified due date.
As a one-time measures to clear the pendency, CBIC has notified
that the amount of late fee payable shall stand waived for the
taxpayers who failed to furnish the details of outward supplies in
Form GSTR-1 for the period from July-2017 to November-2019 by
the due date but furnishes the said return between 19th December,
2019 to 10th January, 2020.
The said notification [Notification No. 74/2019 – Central Tax, dated
26.12.2019] specifies the temporary and conditional waiver of late
fees so as to remove the difficulties faced by taxpayer and not a
complete removal of late fees. Thus the tax payer who has already
paid the late cannot claim refund of such payment.
Q404. Whether tax wrongly paid under section 9(3) of the CGST Act
can be claimed as refund, since it was not required to be paid
or such wrongly paid tax should be used as ITC for adjusting
future liability on outward supply?

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Practical FAQ’s under GST

Ans. Tax wrongly paid and shown in monthly return in Form GSTR-3B
can be corrected. CBIC vide Circular No. 26/26/2017-GST dated
29.12.2017 has prescribed the methodology for rectification of error
in submission of GSTR -3B return. Accordingly, liability which was
wrongly paid tax can be corrected in the return of subsequent
month(s). This method will be useful in the excess payment of an
earlier month being shown as payment relevant for the current
month.
Alternatively such excess paid tax could be claimed as refund by
following the process laid out in Circular No.125/44/2019-GST dated
18.11.2019 with the submission of relevant declarations and
certification that if the refund is granted it would not result in unjust
enrichment.
Q405. Whether refund can be claimed for wrong payment of tax under
forward charge, where tax has also been paid by the recipient
under reverse charge?
Ans. There are two options available with the tax payer;
1. To adjust such excess payment in the subsequent period GSTR
returns as detailed in Circular No.26/26/2017-GST dated
29.12.2017
2. Alternatively, when adjustment is not feasible, the wrongly paid
tax (excess tax) shall be claimed as refund as per the provisions
of rule 89 (2) (k) of the CGST Rules.

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 Chapter 13
E-way Bill
Q406. A Ltd. is engaged in the business of works contract service. It
has registration in various States. For the purpose of execution
of works contract, machines are carried from one State to
another. Whether e-way bill is required to be raised and what
other documents are required to be carried?
Ans. ⚫ When machines are transferred temporarily not as stock
transfers but merely for usage at the site of works contract and
meant for return after work is completed then in terms of rule
138 of the CGST Rules, an e-way bill is to be raised using the
category “Others”. Also, delivery challan in terms of rule 55(1) of
the CGST Rules is to be raised
⚫ When machines are transferred permanently to other State
offices or branches then it amounts to supply in terms of
Schedule I to the CGST Act. Hence, tax invoice in terms of rule
46 of the CGST Rules and e-way bill in terms of rue 138 thereof
need to be raised.
Q407. Is it necessary to have a place of business when the transaction
is under “Bill to Ship to” model. (A case where the buyer does
not want to disclose the original supplier about the third party)
Ans. Let us take the following example to resolve this query
• “A‟ is the person who has ordered “B‟ to send goods directly to
“C‟.
• “B‟ is the person who is sending goods directly to “C‟ on behalf
of “A‟.
• “C‟ is the recipient of goods.
In this above scenario two supplies are involved and accordingly two
tax invoices are required to be issued:
• Invoice -1, which would be issued by “B‟ to “A‟.
• Invoice -2 which would be issued by “A‟ to “C”
Practical FAQ’s under GST

In this case to hide the original invoice details from “C” e-Way Bill
has to be generated by “A‟.
Following fields shall be filled in Part A of FORM GST EWB-01:
1. Bill From: In this field details of “A‟ are to be filled.
2. Dispatch From: This is the place from where goods are actually
dispatched. It may be the principal or additional place of
business of “B‟.
3. Bill To: In this field details of “C‟ are to be filled.
4. Ship to: In this field address of “C‟ is to be filled.
5. Invoice Details: Details of Invoice-2 are to be filled.
Therefore, it is not necessary to have a place of business when the
transaction is under “Bill to Ship to” model.

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 Chapter 14
Penalties under GST
Q408. Is it necessary for a small registered tax payer having a
turnover of ` 15 lakhs per annum to maintain stock register?
Would your answer be different in case he has opted for
composition scheme? He has opted for presumptive taxation
under section 44AD of the Income Tax Act for the purpose of
Income tax.
Ans. ⚫ It is necessary to refer the provisions of section 35(1) of the
CGST Act for answering the above query. It reads thus :
“35. (1) Every registered person shall keep and maintain, at his
principal place of business, as mentioned in the certificate of
registration, a true and correct account of–
(a) production or manufacture of goods;
(b) inward and outward supply of goods or services or both;
(c) stock of goods;
(d) input tax credit availed;
(e) output tax payable and paid; and
(f) such other particulars as may be prescribed:”
• From the above provision, it is clear that every registered
person irrespective of his aggregate turnover shall be required
to maintain stock records. However, a person who has opted to
pay tax under composition scheme under section 10, is exempt
from maintaining stock records as per rule 56(2) of the CGST
Rules. The same is reproduced hereunder:
“(2) Every registered person, other than a person paying tax
under section 10, shall maintain the accounts of stock in
respect of goods received and supplied by him, and such
accounts shall contain particulars of the opening balance,
receipt, supply, goods lost, stolen, destroyed, written off or
disposed of by way of gift or free sample and the balance of
stock including raw materials, finished goods, scrap and
wastage thereof.”
Practical FAQ’s under GST

In terms of the above provisions though a composition tax payer

is not required to maintain stock records he is required to
maintain other details as specified in section 35 viz., details of
manufacture of goods, inward and outward supply of goods or
services. In other words he has to maintain records of his
─ sales of goods and provision of services
─ purchases of goods and receipt of services
• Hence, a registered tax payer whose turnover is ` 15 lakhs per
annum is required to maintain the records as specified in
section 35 read with rule 56. Failure to maintain such accounts
and records shall have the following consequences:
o Determination of Tax payable on unaccounted goods or
services
In case stock records and other specified records are not
maintained as provided by the law, the proper officer may
use the power provided in section 35(6) of the CGST Act.
Said provision empowers the proper officer to determine the
tax payable on unaccounted goods or services, as if such
goods or services had been supplied by registered person
and he will invoke demand and recovery provisions in terms
of section 73 or 74 of the CGST Act.
o Penalty under section 122 of the CGST Act
Section 122(1)(xvi) provides that where a taxable person
fails to keep, maintain or retain books of account and other
documents in accordance with the provisions of this Act or
the rules made thereunder, he shall be liable to pay a
penalty of ten thousand rupees or an amount equivalent to
the tax evaded whichever is higher.
Hence, if specified records are not maintained a penalty of
` 10,000 or an amount equivalent to the tax evaded,
whichever is higher shall be imposed in terms of above
section.

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Q409. Whether offences under section 132(1) (a) or (b) of the CGST
Act, are cognizable and non-bailable?
Ans. Relevant extract of Section 132 of the CGST Act is reproduced
hereunder:
“(1) Whoever commits, or causes to commit and retain the benefits
arising out of, any of the following offences, namely:-
(a) supplies any goods or services or both without issue of any
invoice, in violation of the provisions of this Act or the rules
made thereunder, with the intention to evade tax;
(b) issues any invoice or bill without supply of goods or
services or both in violation of the provisions of this Act, or
the rules made thereunder leading to wrongful availment or
utilisation of input tax credit or refund of tax;
(c) …..
(l) …….
Shall be punishable –
(i) in cases where the amount of tax evaded or the amount of
input tax credit wrongly availed or utilised or the amount of
refund wrongly taken exceeds five hundred lakh rupees,
with imprisonment for a term which may extend to five years
and with fine;
(ii) in cases where the amount of tax evaded or the amount of
input tax credit wrongly availed or utilised or the amount of
refund wrongly taken exceeds two hundred lakh rupees but
does not exceed five hundred lakh rupees, with
imprisonment for a term which may extend to three years
and with fine;
(iii) in the case of any other offence where the amount of tax
evaded or the amount of input tax credit wrongly availed or
utilised or the amount of refund wrongly taken exceeds one
hundred lakh rupees but does not exceed two hundred lakh
rupees, with imprisonment for a term which may extend to
one year and with fine;

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Practical FAQ’s under GST

(iv) in cases where he commits or abets the commission of an

offence specified in clause (f) or clause (g) or clause (j), he
shall be punishable with imprisonment for a term which may
extend to six months or with fine or with both.
(2) ………..
………..
(5) The offences specified in clause (a) or clause (b) or clause (c)
or clause (d) of sub-section (1) and punishable under clause (i)
of that sub-section shall be cognizable and non-bailable.”
• From the above provisions it is clear that on account of offences
specified under clause (a) or (b), if the amount of tax evaded or
wrong availment of ITC or wrong receipt of refund exceeds
rupees five hundred lakhs the offence shall be cognizable
and non-bailable in terms of section 132(5). Also, as per
section 69(2) of the CGST Act, where a person is arrested
under section 69(1) for an offence specified under
section 132(5), the officer authorised to arrest the person shall
inform such person of the grounds of arrest and produce him
before a Magistrate within 24 hours.
Q410. Whether balance of electronic cash ledger under any other head
could be utilized for payment of penalty head wise?
Ans. As per rule 87(13) a registered person is allowed to transfer the
amount in one head of electronic cash ledger to any other head of
electronic cash ledger using FORM GST PMT-09. After transfer of
excess balance in any other head to penalty head, the same may be
used for payment of penalty. Rule 87(13) of the CGST Rules,
referred above is reproduced hereunder:
“A registered person may, on the common portal, transfer any
amount of tax, interest, penalty, fee or any other amount
available in the electronic cash ledger under the Act to the
electronic cash ledger for integrated tax, central tax, State tax or
Union territory tax or cess in FORM GST PMT-09”.

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 Penalties under GST

Q411. If penalty imposed under CGST is ` 10,000, does it imply total

penalty of ` 20,000/- is to be deposited, being an automatic
penalty imposed under SGST also?
Ans. Generally, the quantum of penalty shall be clearly specified in the
order demanding penalty. GST is a con-current levy as per
Article 246A of the Constitution empowering both Centre and State,
and wherever penalty is levied under CGST obviously penalty will be
levied for SGST also.
However, exceptions exist to the above principle, like wrong
availment of transitional credits, and wrong utilization of input tax
credit against the provisions of section 49A or section 49B of the
CGST Act read with rule 88A of the CGST Rules. In these cases,
penalty shall be levied only on that portion of tax which is wrongly
availed or utilized.
Q412. A product is subject to tax at a rate of 18%. However, a taxable
person with a wrong understanding has classified it under 12%
HSN and made short collection of the tax and duly paid it. Later
on, during Departmental audit, it was found that the product is
wrongly classified and the Department demanded differential
tax. Can the taxable person claim that under bona fide belief he
had classified the product wrongly and hence higher penalty
should not be imposed?
Ans. If the assessee has bona fide belief that lower tax is applicable, then
penalty equivalent to tax cannot be levied under section 74 of the
CGST Act. Onus of proving bona fide belief of lower rate is on the
assessee and not on the Department. In this regard, many decisions
under the erstwhile indirect tax law are available. Some of these are
listed below:
• An element of fraud is must to invoke extended period of
limitation – When entire data is disclosed in ST-3 return the
extended period cannot be invoked [Scott Wilson Kirkopatrick
P. Ltd v. Commissioner of Service Tax [2007 8 ST 358] –
CESTAT Bengaluru. In the above case also, the assessee
would have disclosed the HSN which he deems to be correct in
Form GSTR-1, hence one may take above case as the defense.
When service tax was introduced, some lapses and delays did

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Practical FAQ’s under GST

occur. Penalty had been reduced or waived in cases like Shri

Sajjan Kumar Kariwala v. CCE 2007 11 STT 479 – CCE v.
Global Cargo Forwarders (2005) 1 STT 5 CESTAT – Taradevi
Bafna v. CCE 2010 26 STT 228 SMB CESTAT – Sakthi
Promoters v. CCE 2010 29 STT 161 CESTAT SMB. These
cases can be relied for GST too, since GST is also a new tax
and many amendments were introduced, contradictory circulars
issued and some withdrawn.

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 Chapter 15
Nature of Supply
Q413. A service contract is made with a foreign company to provide
necessary manpower within the State where the service
provider is registered. Whether CGST /SGST or IGST to be
charged?
Ans. In the given case, there are two possibilities –
(a) the foreign company does not have a fixed establishment in
India and
(b) the foreign company has a fixed establishment in India.
In case of (a), the service provider is a person in taxable territory
whereas the service recipient is a person located in non-taxable
territory and hence to determine the place of supply, section 13 of
the IGST Act needs to be looked upon. Now, there is no specific
provision covering supply of manpower under section 13(3) to
section 13(12) of the IGST Act. Hence, the general principle under
section 13(2) of the IGST Act would be applicable to determine the
place of supply which is the location of the recipient. Also, location
of the recipient of services is defined under section 2(14) of the
IGST Act. Hence, in the given case, the place of supply is the
location of recipient which is in non-taxable territory and hence the
supply would be treated as an inter-State supply as per section 7(5)
of the IGST Act.
In case of (b), since the service recipient is registered in India, the
place of supply is to be determined under section 12 of the IGST Act
and as per general principle of section 12(2) of the IGST Act, the
place of supply would be the location of recipient in case of
registered assessee. Hence, the place of supply will be India and
assuming that the recipient and the supplier are registered in the
same State, the same would be treated as intra-State supply under
section 8(2) of the IGST Act and CGST and SGST have to be
charged.
Practical FAQ’s under GST

Q414. A dealer in Karnataka makes outward supply to a dealer

registered in Maharashtra. However, the goods are delivered to
a dealer within the State of Karnataka, who happens to be the
customer of the Maharashtra dealer. Please clarify the nature of
supply.
Ans. This is a ‘Bill to Ship to’ situation. Goods are delivered by dealer in
Karnataka, on the direction of dealer registered in Maharashtra to
his work place in Karnataka. In this case, it shall be deemed that the
dealer registered in Maharashtra has received the goods and place
of supply shall be the principal place of business of the dealer in
Maharashtra.
Accordingly, this transaction shall be treated as inter-State supply
and IGST shall be charged on the invoice. Refer section 10(1) (b) of
the IGST Act.
Q415. I am silver wholesaler in Maharashtra and a trader from
Karnataka purchased silver in Maharashtra. The supply is in
Maharashtra only but the trader from Karnataka demands
charging of IGST. Is his demand correct?
Ans. Section 10(1) (a) of the IGST Act says: “where the supply involves
movement of goods, whether by the supplier or the recipient or by
any other person, the place of supply of such goods shall be the
location of the goods at the time at which the movement of goods
terminates for delivery to the recipient.”
This implies that the place of supplier or receiver is of no
consequence to determine the place of supply when it is related to
transactions which involve movement of goods.
A person from Karnataka comes to Maharashtra and purchases
goods. He declares his GSTIN, arranges transport himself and takes
goods to Karnataka. The place of supply would be Karnataka in this
case and therefore IGST can be charged by the supplier.
Q416. A is a service provider in India rendering services outside
India. However he is not claiming these services as export of
services. How will A charge GST on these services - as
inter-State (IGST) or intra-State (CGST+SGST)?

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 Nature of Supply

Ans. Section 7(5) of the IGST Act provides: “Supply of goods or services
or both, -
(a) when the supplier is located in India and the place of supply is
outside India;
(b) to or by a Special Economic Zone developer or a Special Economic
Zone unit; or
(c) in the taxable territory, not being an intra-State supply and not
covered elsewhere in this section,
shall be treated to be a supply of goods or services or both in the
course of inter-State trade or commerce.”
Further as per section 5(1) of the IGST Act, there shall be levied a tax
called the integrated goods and services tax on all inter-State supplies
of goods or services or both.
Applying the above provisions of the Act to the instant case, the
services are provided outside India which is in the nature of inter-State
supply; IGST will be charged as per the above provisions. However, it is
pertinent to note here that the assessee has to apply the provisions of
IGST Act with respect to place of supply to decide whether this
transaction falls under export of services or not and accordingly comply
with the law.
Q417. A person registered in Maharashtra owns a hotel property in
Gujarat, which is rented to a person registered in Maharashtra.
Invoice is issued to the person registered in Maharashtra. Is it
intra-State or inter-State transaction?
Ans. In the case of immovable property, the place of supply is the location
of the immovable property. In the given situation, the property is
located in the State of Gujarat. The State of Gujarat is entitled to
levy and collect the tax. Accordingly, this will be an intra- State
supply.
Q418. Rent a cab service is provided to a foreign national visiting
India. Bill is submitted in the name of foreign company.
Payment is also received in foreign currency. Is this an export
of service?

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Practical FAQ’s under GST

Ans. ⚫ In term of section 2(6) of the IGST Act, a service shall be

considered as export of service only if, it satisfies the following
parameters :-
▪ the supplier of service is located in India;
▪ the recipient of service is located outside India;
▪ the place of supply of service is outside India;
▪ the payment for such service has been received by the
supplier of service in convertible foreign exchange [or in
Indian rupees wherever permitted by the Reserve Bank of
India]; and
▪ the supplier of service and the recipient of service are not
merely establishments of a distinct person in accordance
with Explanation 1 in section 8.
• In the above parameters, one of the conditions is that the place
of supply shall be outside India. Hence, the applicable section
for the given case is section 13(8) of IGST Act, which reads as
follows:
“13(8) The place of supply of the following services shall be
the location of the supplier of services, namely:-
(a) .services supplied by a banking company, or a financial
institution, or a non-banking financial company, to
account holders;
(b) intermediary services;
(c) services consisting of hiring of means of transport,
including yachts but excluding aircrafts and vessels, up
to a period of one month.”
• In the given example, it is presumed that such rent a cab
service is provided for a period less than one month. From the
above, it is clarified that the supplier of service is located in
India. Hence, the place of supply is said to be in India. Since,
this condition is not satisfied the given service does not amount
to export of service.

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 Nature of Supply

Q419. Whether hotel service provided to SEZ would be treated as

inter-State or intra-State supply?
Ans. The CBIC vide Circular No 48/22/2018-GST, dated 14.6.2018, has
aptly clarified / addressed the issue in question as under:

Sl. Issue Clarification

No.
1. Whether services of 1.1 As per section 7(5) (b) of the
short-term IGST Act, the supply of goods or
accommodation, services or both to a SEZ developer or
conferencing, a SEZ unit shall be treated to be a
banqueting etc. supply of goods or services or both in
provided to a Special the course of inter-State trade or
Economic Zone commerce. Whereas, as per section
(SEZ) developer or a 12(3)(c) of the IGST Act, the place of
SEZ unit should be supply of services by way of
treated as an inter- accommodation in any immovable
State supply (under property for organising any functions
section 7(5)(b) of the shall be the location at which the
IGST Act) or an immovable property is located. Thus,
intra-State supply in such cases, if the location of the
(under section supplier and the place of supply is in
12(3)(c) of the IGST the same State/ Union territory, it
Act)? would be treated as an intra-State
supply.
1.2 It is an established principle of
interpretation of statutes that in case
of an apparent conflict between two
provisions, the specific provision shall
prevail over the general provision.
1.3 In the instant case, section 7(5)(b)
of the IGST Act is a specific provision
relating to supplies of goods or
services or both made to a SEZ
developer or a SEZ unit, which states
that such supplies shall be treated as
inter-State supplies.

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Practical FAQ’s under GST

1.4 It is therefore, clarified that

services of short-term
accommodation, conferencing,
banqueting etc., provided to a SEZ
developer or a SEZ unit shall be
treated as an inter-State supply.

Moreover, the Hon’ble Supreme Court in the case of Commercial

Tax Officer v. Binani Cement Ltd. & Anr decided on
19th February, 2014 inter alia held: “It leaves no doubt that what is
specific has to be seen in contradistinction with the other
items/entries. The provision more specific than the other on the
same subject would prevail”
As inferred from above, the two provisions namely section 7(5)(b)
and section 12(3)(c) of the IGST Act, though conflicting in nature
with regard to supply of accommodation services in any immovable
property to a SEZ Unit, specific [section 7(5)(b)] will prevail. Hence,
hotel services provided to SEZ would be treated as inter-State
supply.
Q420. A is a Consultant in Mumbai who has clients only in Mumbai. A
travels to Delhi for some work and he gets a call in his mobile
from a Client who seeks immediate advice. What will be the
nature of supply, when A raises the bill for this transaction. Is
this an inter-State or intra-State transaction?
Ans. A supply of service is an-
Inter-State supply when the location of the supplier and the place of
supply are in two different States or Union Territory - Section 7(3) of
the IGST Act subject to section 12 of The IGST Act; and
Intra-State supply when the location of the supplier and the place of
supply are in same State or Union Territory - Section 8(2) of The
IGST Act subject to section 12 of The IGST Act
The location of the supplier as per section 2(71) of the CGST Act will
be-
(a) where a supply is made from a place of business for which the
registration has been obtained, the location of such place of
business;

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 Nature of Supply

(b) where a supply is made from a place other than the place of
business for which registration has been obtained (a fixed
establishment elsewhere), the location of such fixed establishment;
(c) where a supply is made from more than one establishment, whether
the place of business or fixed establishment, the location of the
establishment most directly concerned with the provisions of the
supply; and
(d) in absence of such places, the location of the usual place of
residence of the supplier;
In the instant case, the location of the supplier falls within the ambit of
section 2(71) (d) of the CGST Act, in the absence of any fixed
establishment and place of business in Delhi. Therefore, the location of
Supplier is in Mumbai.
Further, as per section 12(2) of the IGST Act the place of supply of
services, except the services specified in sub-sections 12 (3) to (14) of
the IGST Act,
a) made to a registered person, shall be the location of such person;
b) made to any person other than a registered person, shall be,––
(i) the location of the recipient where the address on record exists;
and
(ii) the location of the supplier of services in other cases.
the instant case the place of supply of service shall be Mumbai.
Since the Location of supplier and place of supply are in the same State
the transaction will be an intra-State as per section 8(2) of the IGST Act
and hence liable for CGST/SGST.
Q421. A supplier registered in the Chhattisgarh got a contract from a
customer in Uttar Pradesh for hiring of earth moving equipment
like boom placer, excavator etc. on hourly rental basis. All
machines were purchased from Delhi by the supplier and
directly sent to Uttar Pradesh for rendering service to the
customer. Whether letting of these machines on hire by the
supplier located in Chhattisgarh to the customer in Uttar
Pradesh amounts to inter-State supply of service? If supplier

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Practical FAQ’s under GST

also is registered in the Uttar Pradesh, then what would be the

situation?
Ans. All the machines like boom placer, excavator etc. are goods as per
section 2(52) of the CGST Act owned by the supplier in Chhattisgarh
which were given on hire to his customer in Uttar Pradesh. This
transaction amounts to supply of service as it is an activity of
transfer of right to use goods for any purpose (whether or not for a
specific period) for cash, deferred payment or other valuable
consideration, as per Entry No. 5(f) of Schedule II of the CGST Act.
Once the activity is concluded as supply of services, the next step is
to determine the nature of supply, whether it is inter-State supply as
per section 7 of the IGST Act or intra-State supply as per section 8
of the IGST Act. For determining the nature of supply two aspects
have to be determined, one is location of supplier of service and
another one is place of supply of service.
Location of supplier of service as per section 2(15) (a) of the IGST
Act means a place of business from where supply is made for which
the registration has been obtained. In the given case, since the
supplier holds a registration in Chhattisgarh it is construed as place
of business from where the business is ordinarily carried on (i.e.) the
location from where all decisions are taken and hence it is
considered as the place where the 'seat of management and control
is located. Further the location where the goods like concrete
mixture, boom placer, excavator, etc. are placed for supplying
service to the customer cannot be considered as fixed establishment
as per section 2(7) of the IGST Act, as for being a fixed
establishment, such place should be characterised by a sufficient
degree of permanence and suitable structure in terms of human and
technical resources for supply of services should be there. Hence
the location of the supplier shall be concluded as Chhattisgarh.
As far as the place of supply of service is concerned, residuary
provisions of section 12(2) of the IGST Act will apply for determining
the nature of service provided by the suppler. If the customer in
Uttar Pradesh is a registered person, then the place of supply of
service shall be the location of the customer being the recipient of
service. If the customer in Uttar Pradesh happens to be an
unregistered person, then the place of supply shall be the location of

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 Nature of Supply

the customer where the address exists on record. Thus, in the given
case, since the location of supplier of service is in Chhattisgarh and
the place of supply of service is in Uttar Pradesh this is a clear case
of inter-State supply as per section 7 of the IGST Act and IGST has
to be levied on such letting of machines like boom placer, excavator,
etc. on hire.
If the supplier already holds a registration in Uttar Pradesh, then this
transaction will be an intra-State supply as per section 8 of the IGST
Act, as both the location of supplier as per section 2(15) (a) of the
IGST Act and the place of supply of service as per section 12(2)
thereof are in the same State, namely Uttar Pradesh.
Q422. Tools are manufactured in India for the customer out of India
and billed separately before starting production. The tools are
to be used for manufacture of the goods to be exported to the
same person out of India. In such case what will be nature of
supply? Whether supply of tools is export of goods or not?
Ans. The above query can be resolved by analysing the provisions of
sections 2(5), 8(1) and 10(1) (c) of the IGST Act
Section 2(5) of the IGST Act amongst other things states:
“export of goods” with its grammatical variations and cognate
expressions, means taking goods out of India to a place outside
India;”
Section 8(1) of the IGST Act amongst other things states:
“Subject to the provisions of section 10, supply of goods where
the location of the supplier and the place of supply of goods are
in the same State or same Union territory shall be treated as
intra-State supply:…”
Section 10 (1) (c) of the IGST Act amongst other things states:
“the place of supply of goods other than supply of goods
imported into or exported from India shall be the place of supply
shall be the location of such goods at the time of the delivery to
the recipient where the supply does not involve movement of
goods, whether by the supplier or the recipient”

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Practical FAQ’s under GST

In the present case though the tools are separately billed to the
customer out of India they are used to manufacture the goods in
India and are not taken out of India.
Therefore, supply of tools will not be treated as export of goods as
per section 2(5) of the IGST Act and will be taxed as a supply within
India.
Further in the present case the supply does not involve movement of
goods as the goods are consumed in the factory where it was
manufactured and as such the place of supply is the factory and the
location of supplier is also the factory itself.
Therefore, the supply of tools in the present scenario shall be
treated as intra-State supply liable for CGST and SGST.
Q423. What will be the place of supply in case of ex-factory sales? For
example, if we sell the goods from Mumbai on ex-factory basis
to be taken to Chennai and risks are transferred to the customer
at the factory in Mumbai?
Will it be inter-State or intra-State supply i.e., whether to charge
IGST or CGST and SGST/UTGST for such supply?
What will be the answer if the purchaser is not registered?
Ans. The relevant legal provision which deals with the place of supply for
goods is section 10(1) of the IGST Act. It provides for the following-
(a) where the supply involves movement of goods, whether by the
supplier or the recipient or by any other person, the place of
supply of such goods shall be the location of the goods at the
time at which the movement of goods terminates for delivery to
the recipient;
(b) …
(c) where the supply does not involve movement of goods, whether
by the supplier or the recipient, the place of supply shall be the
location of such goods at the time of the delivery to the
recipient;
Ex-factory supplies are transactions wherein normally the sale is
completed at the factory gate itself, i.e., the risk and rewards are
transferred from supplier to buyer at factory premises.

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 Nature of Supply

For the purpose of the present discussion, let’s consider this

example:
Example: X of Mumbai, Maharashtra gets an order of 100 TV sets
from XYZ Ltd. of Chennai, Tamil Nadu. XYZ Ltd mentions that it will
arrange its own transportation and take TV sets from. X on
ex-factory basis.
Applying the provisions of section 10(1) (a) of IGST Act following are
the possible scenarios:
1. There is movement of goods by the supplier or the recipient or
by any other person. In this case by the recipient - from Mumbai
to Chennai.
2. Where does the movement of goods for delivery to the recipient
terminate in the case of ex-factory sales i.e., in Mumbai
(Maharashtra) or Chennai (Tamil Nadu) in the present case?
There are two views possible in determining the place of supply in
the case of ex-factory supplies, based on the interpretation of
section 10 of the IGST Act:
• In case of ex-factory supply, goods are made available to the
recipient at the factory gate itself. Therefore, the movement of
goods terminates at the factory gate and consequently place of
supply shall be the location of the factory. Thus, it shall be
treated as an intra-State supply in Maharashtra as movement of
goods terminates for delivery terminates at Mumbai factory.
• Another view is basing a strong emphasis on the words,
“whether by supplier or the recipient or by any other person”.
Since the movement in the above example terminates at
Chennai, i.e., the place where the goods are destined to, the
place of supply should be Tamil Nadu.
Similar issue was decided in the case of Lalitha Muraleedharan
Versus. Range Forest Officer [2020 (1) TMI 928] by the Hon’ble
Kerala High Court held as under:
• The petitioner upon completion of other sale conditions receives
goods at the premises of the supplier, and acknowledgment of

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Practical FAQ’s under GST

goods at supplier’s premises does not result in termination of

movement of goods but results in further movement of goods at
the hands of recipient to his location.
• The final destination, i.e., location of the recipient is supply
point. The actual place of supply by plain interpretation of
section 10(1) of the IGST Act is the location of recipient in the
State of Tamil Nadu, not in State of Kerala, where the goods
were handed over to the recipient.
• Therefore, the contention of respondents that supply of goods is
completed at supplier’s location and subject sets is an intra-
State transaction is unsustainable.
Conclusion
• Based on the above provisions and the Court decision cited
above, it can be said that the place of supply in case of ex-
factory supplies in the present case shall be Tamil Nadu.
Therefore, IGST should be charged.
• The answer will remain the same even if the buyer of the goods
in Chennai is un-registered. However, there was a draft circular
addressing the place of supply in case of “Over the Counter
Sales” (Which is similar to ex-factory supplies) which provided
the following:
o Where the supply is to an unregistered person and where
the recipient's address is not available on record, the place
of supply would be determined in accordance with the
provisions contained in clause (c) of sub-section (1) of
section 10 of the IGST Act.
o The place of supply in such cases would be the location of
goods at the time of delivery to the recipient. Accordingly,
such supplies would be treated as intra-State supplies in
accordance with the provisions contained in sub-section (1)
of section 8 of the IGST Act.
o It is further clarified that the supplier would be liable to
pay Central tax and State tax / Union territory tax in such
cases.

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 Nature of Supply

• The above circular was placed before GST Council in its 37th
meeting held on 20th of September 2019 but was not circulated
or finalized on account of different views of Council Members of
different States.
• In any event, the circular covered the scenario where the
address of the recipient was not available. In case the address
on record of the purchaser is available (i.e., Chennai), then such
supplies would still be inter-State supplies in the present case.
Q424. A property is located at Dhanu, Maharashtra, while the
contractor is in Gujarat. Repairs and maintenance contract
(RMC) services would be provided by supplier in Maharashtra
to the contractor in Gujarat for the property in Maharashtra.
What would be the GST applicable?
Ans. In the case of any service relating to immovable property including
works contract service, grant of rights to use immovable property,
services for carrying out or co-ordination of construction work,
including that of architects or interior decorators, the place of supply
shall be the locations of such immovable property vide section 12(3)
of the IGST Act.
In case the RMC services are being made available by a person in
the State of Maharashtra to a contractor in Gujarat for the purpose
of a works contract for a property situated in Maharashtra, the
location of the supplier and place of supply would be within
Maharashtra and accordingly CGST and Maharashtra SGST would
be applicable.
Q425. If an architect staying in Mumbai provides architectural
services for a property located in Dubai whose owner stays in
Mumbai, what will be the nature of transaction; whether it will
be an Intra- State or Inter-State supply of service?
Ans. To decide the nature of any transaction under GST, we have to
first ascertain the place of supply and the location of the
supplier.
Place of Supply - As per section 12(3) (a) of the IGST Act, the place of
supply of services directly in relation to an immovable property,
including services provided by architects, interior decorators,

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surveyors, engineers and other related experts or estate agents, any

service provided by way of grant of rights to use immovable property
or for carrying out or co-ordination of construction work shall be the
location at which the immovable property is located or intended to
be located.
However, there is an exception to this provision as provided in the first
proviso to section 12(3) of the IGST Act which provides: “if the location of
the immovable property or boat or vessel is located or intended to be
located outside India, the place of supply shall be the location of the
recipient.”
Thus, the place of supply in the instant case shall be Mumbai in the
State of Maharashtra.
Location of Supplier-The Architect in the instant case is in Mumbai and
thus the location of the supplier is in the State of Maharashtra.
Since both location of supplier and place of supply are in the same State
i.e. Maharashtra, the transaction will be an intra-State supply as per
section 8(2) of the IGST Act, liable for CGST/SGST
Q426. X has undertaken a construction contract to build a College
covering 40,000 Sq.Ft. The property is situated on the border of
Tamil Nadu and Kerala. Place of supply of service spreads across
two States. How the invoicing should be done by the service
provider and which GST shall be charged in case the service
recipient is registered or not in one of the States?
Ans. As per the explanation to section 12(3)(c) of the IGST Act, where the
immovable property or boat or vessel is located in more than one State
or Union territory, the supply of services shall be treated as made in
each of the respective States or Union territories, in proportion to the
value for services separately collected or determined in terms of the
contract or agreement entered into in this regard or, in the absence of
such contract or agreement, on such other basis as may be
prescribed. The same is also prescribed in Rule 4 of the IGST Rules,
2017 [“the IGST Rules”].
Further as per Rule 4 of the IGST Rules, in the absence of an
agreement, the supply of services shall be treated as made in each
of the respective States or Union territories, in proportion to the area
of the immovable property lying in each State or Union territory

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 Nature of Supply

Applying the above provisions the following propositions emerge:

1. X must get registered in both the States
2. He must raise two separate Invoices
• For supply made to State-A: Invoice will be raised under the
GSTN of State A either as per agreement or in proportion to
the area of the immovable property lying in State A and
CGST/SGST will be charged irrespective of where the
recipient is registered
• For Supply made to State-B: Invoice will be raised under
the GSTN of State B either as per agreement or in
proportion to the area of the immovable property lying in
State B and CGST/SGST will be charged irrespective of
where the recipient is registered
3. He should apportion the taxable value as per agreement if any and if
not as per area covered in both the States.
Q427. Suppose we provide service from Karnataka to a customer
either outside Karnataka or within Karnataka, but the payment
is received from their parent company abroad in USD, will this
be treated as “export of service”.
Ans. A transaction to be qualified as export of service must satisfy all the
following conditions as per section 2(6) of IGST Act:
(i) the supplier of service is located in India;
(ii) the recipient of service is located outside India;
(iii) the place of supply of service is outside India;
(iv) the payment for such service has been received by the supplier
of service in convertible foreign exchange; and
(v) the supplier of service and the recipient of service are not
merely establishments of a distinct person in accordance with
Explanation 1 in section 8 of the IGST Act;
The instant transaction is not satisfying point No (iii). As the place of
supply of service is in India it will not be treated as export of service
and IGST in case of supply outside Karnataka and CGST/SGST in
case of supply within Karnataka will be charged.

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Q428. In the case of training services, we have seen many Institutes

charge CGST/ SGST respectively even if the recipient is a
registered person in another State. Ideally it should be IGST
and payment is made online. What would be the consequences
if incorrect tax is levied?
Ans. Section 12(5) of the IGST Act provides:
“the place of supply of services in relation to training and
performance appraisal to,––
a) a registered person, shall be the location of such person;
b) a person other than a registered person shall be the location
where the services are actually performed.”
As such in the instant case the supply of service shall be inter-State
[Section-7(3) of IGST Act] and IGST is leviable as per section 5 of
the IGST Act. Since the supplier of service has paid tax under wrong
head treating the inter-State sales as intra-State, the supplier is
required to pay IGST and claim refund of CGST/SGST as per
section 77(1) of The CGST Act. Further the supplier will not be
required to pay interest while making payment under correct head
(Section 77(2) of the CGST Act). As per recent amendments the
amount can be transferred to the correct head by filing the
prescribed form.
Q429. Transporter of Rajasthan bringing goods from Gujarat to
Mumbai. If the transporter is registered RCM should be IGST
and if he is not registered it will be SGST and CGST. Is it
correct?
Ans. As per section 2(98) of the CGST Act “reverse charge means the
liability to pay tax by the recipient of supply of goods or services or
both instead of the supplier of such goods or services or both under
sub-section (3) or sub-section (4) of section 9, or under sub-section
(3) or sub-section (4) of section 5 of the Integrated Goods and
Services Tax Act”
IGST is payable where the location of the supplier and the place of
supply are in two different States. In case of intra-State transaction if
location of supplier and place of supply are in same State,
SGST/CGST is payable.

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 Nature of Supply

As per section 2(15) of the IGST Act "location of the supplier of

services" is place of registration where supply is made from
registered place of business. If supply is made from a fixed
establishment elsewhere, the location of supplier is such fixed
establishment. In absence of such places, the location of the usual
place of residence of the supplier is location of supplier.
The place of supply in case of transportation of goods, to a
registered person, shall be the location of registered person;
[Section 12(8) of IGST Act].
In the given question, transporter of Rajasthan brings goods from
Gujarat to Mumbai.
(i) If the transporter is registered in Rajasthan: - In this case the
location of supplier i.e., the transporter is Rajasthan. Since the
service receiver is registered in Mumbai, the place of supply
shall be location of such service receiver, i.e. Mumbai. Since
location of supplier and place of supply are in different States,
IGST is payable under Reverse charge.
(ii) If the transporter is not registered in Rajasthan: - In this case
the location of transporter will be usual place of residence of the
transporter. The place of supply remains Mumbai. If transporter
resides in Rajasthan, then location of supplier will be Rajasthan
and place of supply will be Mumbai. In such case IGST is
payable under reverse charge.
Q430. An authorised service station of a car maker is preparing a
single invoice for spare parts and labour portion and charging
separate rates of tax on each part and service portion. Where
the invoice is raised on a registered recipient from another
State, whether they are bound to charge CGST/ SGST on supply
of goods and IGST on labour portion?
Ans. Supply by authorized service station of the car maker, is in fact,
composite supply of goods and services both as defined in
section 2(30) of the CGST Act, and is liable to tax as per the
provisions of section 8 of the CGST Act. However, the Government
has issued Circular No. 47/21/2018 dated 08.06.2018 clarifying
certain issues as under :

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Practical FAQ’s under GST

Sl. Issue Clarification

No
2 How is servicing of cars 2.1 The taxability of supply
involving both supply of would have to be determined on
goods (spare parts) and a case to case basis looking at
services (labour), where the facts and circumstances of
the value of goods and each case.
services are shown 2.2 Where a supply involves
separately, to be treated supply of both goods and
under GST? services and the value of such
goods and services supplied are
shown separately, the goods
and services would be liable to
tax at the rates as applicable to
such goods and services
separately.

Therefore, the place of supply of goods and place of supply of

services can be determined separately as per the provisions of
sections 10 and 12 of the IGST Act respectively.
In case of supply of spare parts (supply of goods) by applying
provisions of section 10(1) (a) of the IGST Act.
Two views are possible as per this clause:
(a) The delivery terminates when the spare part is fitted to the
vehicle, in which case place of supply shall be the location of
the service station.
(b) Delivery of spare parts is given to the recipient for further
movement to other State; the place of supply shall be the
location of the goods at the time at which the movement of
goods terminates for delivery to the recipient. In such case if the
movement terminates in the other State, the transaction will be
treated as Inter-State supply and IGST is payable.
In case of supply of labour charges (supply of services), one has to
apply the provisions of section 12(2) of the IGST Act. Since recipient
is registered in the other State, the place of supply shall only be the
recipient’s location, accordingly IGST is payable.

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 Nature of Supply

Q431. A diamond dealer supplies goods from Surat to Bhavanagar

(both in Gujarat) but raises invoice from Mumbai office.
Whether CGST and SGST or IGST should be levied?
Ans. CGST / IGST Act do not define the location of supplier of goods or
location of recipient of goods. Hence, these are to be determined
based on the inference from other provisions only. In the above
question, there are two possibilities:
(i) The diamonds are supplied from his own place at Surat.
(ii) The diamonds are purchased from Surat dealer and supplied to
Bhavnagar dealer.
In first case, where diamonds are supplied from his own place of
business, then as per section 22(1) of the CGST Act, the supplier
shall be liable to be registered, subject to the turnover limits, in the
State of Gujarat from where he makes a taxable supply of goods. In
such situation, he cannot issue invoice from Mumbai office, since
this supply does not pertain to Maharashtra State.
In the second case, where the diamonds are purchased from Surat
and sent to Bhavnagar, section 10(1) (b) of IGST Act will be
applicable. That section reads:
“where the goods are delivered by the supplier to a recipient or
any other person on the direction of a third person, whether
acting as an agent or otherwise, before or during movement of
goods, either by way of transfer of documents of title to the
goods or otherwise, it shall be deemed that the said third person
has received the goods and the place of supply of such goods
shall be the principal place of business of such person;”
Hence, it will be deemed that the Surat dealer has supplied to
Mumbai dealer and the Mumbai dealer has received the goods.
Hence the Surat dealer will charge IGST to Mumbai dealer. Since it
is deemed that the Mumbai dealer has received the goods, the
subsequent sale by Mumbai dealer will also result in deemed
movement from Mumbai to Bhavnagar and the Mumbai dealer will
issue invoice and charge IGST to Bhavanagar dealer.
Q432. A company registered in Tamil Nadu is involved in giving its
computers on hire to an Institute registered in Karnataka for

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conducting exams. Is this an inter-State supply or intra-State

supply?
Ans. ⚫ In terms of Entry No. 5C of Schedule II of the CGST Act, giving
the computers on hire by a company registered in Tamil Nadu to
an Institute in Karnataka is a supply of service
• As per section 7 of the IGST Act, if the location of supplier and
place of supply are in two different States or two different Union
Territories or a State and a Union Territory, then it shall be
regarded as inter-State supply.
• In the given example, location of supplier is in Tamil Nadu.
Place of supply shall be determined as per the provisions of
section 12 of IGST Act. The supply of services where they are
not specifically covered by sub sections (3) to (14), the same
shall be determined as per sub-section (2) of section 12 of the
IGST Act.
• The service stated in the given example is not covered by any of
the specific circumstances given in sub-section (3) to (14).
Hence, the default provision of sub-section (2) will apply. As per
sub-section (2) the place of supply of services except the
services specified in sub-sections (3) to (14) made to a
registered person shall be the location of such person. Hence,
in the given example, location of recipient is Karnataka; and the
same would be treated as place of supply.
• Since, location of supplier i.e. Tamil Nadu and place of supply
i.e. Karnataka are in two different States, this would be
considered as an inter-State supply of service.
Q433. If a service provider is in Chennai and recipient is in Pune,
under RCM, whether IGST or CGST and SGST to be paid?
Ans. Section 2(98) of the CGST Act, defines the term ‘reverse charge’,
which in turn refers to section 9(3) and section 9(4). Further, the
provisions of section 9(3) and 9(4) mention that all provisions of the
GST law shall apply on the recipient as if he is the person liable to
pay tax in relation to such supply. Therefore, the recipient shall
follow the provisions in relation to the place of supply under the

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 Nature of Supply

IGST Act, as amended. The applicability of CGST/SGST or IGST

shall be decided accordingly based on the nature of services.
Q434. Whether all transactions by SEZ unit should be shown as inter-
State transactions and IGST would be applicable to the unit?
Ans. SEZs are considered to be located in a foreign territory. Thus, the
transactions with SEZ’s can be classified as exports and imports.
Any kind of transaction with SEZ will be considered as inter-State
transactions and IGST will be charged on the same.

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 Chapter 16
Place of Supply
Q435. What are the services that can be covered under Online
Information Database Access and Retrieval Service (OIDAR)?
What is the place of supply in case of OIDAR Service?
Ans. OIDAR is a category of services provided through the medium of
internet and received by the recipient online without having any
physical interface with the supplier of such services. For example,
downloading of an e-book online for a payment would amount to
receipt of OIDAR services by the consumer downloading the e-book
and making payment.
As per Section 2(17) of the IGST Act- “OIDAR means services
whose delivery is mediated by information technology over the
internet or an electronic network and the nature of which renders
their supply essentially automated and involving minimal human
intervention and impossible to ensure in the absence of information
technology and includes electronic services such as,-
(i) advertising on the internet;
(ii) providing cloud services;
(iii) provision of e-books, movie, music, software and other
intangibles through telecommunication networks or internet;
(iv) providing data or information, retrievable or otherwise, to any
person in electronic form through a computer network;
(v) online supplies of digital content (movies, television shows,
music and the like);
(vi) digital data storage; and
(vii) online gaming;”
Place of supply in case of OIDAR Services.
• For any supply to be taxable under GST, the place of supply in
respect of the subject supply should be in India.
 Place of Supply

• In case both the supplier of OIDAR service and the recipient of

such service are in India, the place of supply would be the
location of the recipient of service, i.e., it would be governed by
the default place of supply under section 12 (2) of the IGST Act.
• In case either the service provider or the service recipient is
located outside India, the place of supply of OIDAR services will
be the location of the recipient of the services, under section 13
of the IGST Act. Thus, in cases where the supplier of service is
located outside India and the recipient is located in India, the
place of supply would be India and the transaction would be
amenable to tax.
Q436. A, a jeweller is a registered person under GST, who attends a
Jewellery exhibition in Dubai by paying a fee. Is it covered
under RCM?
Ans. As per the provisions of section 13(5) of the IGST Act, the place of
supply shall be the location where the exhibition is being held i.e.,
Dubai. Therefore, as per section 7(1) (b) of the CGST Act, the said
transaction shall be outside the scope of supply, as the place of
supply is outside India. Consequently, reverse charge shall not be
applicable on the same.
Q437. X has a registered office in Mumbai and also has another office
in Gujarat, which is not registered in GST. Bank Audit in
Mumbai is done by my Gujarat Team and report is signed by X
and billing is also done from Gujarat office. What will be the
GST effect when the billing is done by Gujarat Office?
 This situation attracts section 24 of the CGST Act, which
provides for compulsory registration in case of any inter-State
supplies being made by a person. Thereby, the Gujarat office
shall be liable to get registered in this case. Moreover, if at one
premises registration is taken, it is compulsory to take
registration at other premises since aggregate turnover limit
prescribed under section 2(6) of the CGST Act is determined on
PAN-India basis.
⚫ The Place of supply of service in the given case shall be
governed by section 12(2) (a) of the IGST Act, according to
which where services are supplied to any registered person, the

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Practical FAQ’s under GST

place of supply shall be the location of the recipient of the

services. In this case the place of supply shall be Maharashtra
and the services being provided by Gujarat team, shall amount
to inter-State supply of services that would be subject to
applicable GST.
Q438. An advertising agency registered in the State of Telangana is
dealing with advertisements on hoardings at Hyderabad. It
received an order from a Mumbai party for display of
advertisement at Hyderabad. What is the place of supply;
whether IGST or CGST/SGST applicable?
Ans. As per section 7(3) of the IGST Act, supply of services, where the
location of the supplier and the place of supply are in two different
States, shall be treated as a supply of services in the course of inter -
State trade or commerce.
Further, as per section 5(1) of the IGST Act, integrated goods and
services tax (IGST) shall be levied on all inter-State supplies of
goods or services or both.
Place of supply of services where location of supplier and recipient
is in India is determined by applying the provisions of Section 12 of
the IGST Act.
In the above example, location of the supplier of service is fixed i.e.
State of Telangana. Now coming to the issue for deciding place of
supply in case of hoarding depends on, whether the hoarding is
moveable property or immoveable property.
a) If the ‘Hoarding’ is treated as immovable property, then the
place of supply, by virtue of provisions of section 12(3) of the
IGST Act, is where the immoveable property is located i.e.
Hyderabad. In such case the Hyderabad dealer will charge
SGST/CGST in the State of Telangana, being intra-state
transaction.
b) If the ‘Hoarding” is treated as movable property,: As per the
Madras High Court decision in case of Selvel Advertising
Pvt.Ltd. 89 STC 1, the hoardings are treated as moveable
property due to change in technology. The printed hoardings
are removable. The Court observed that hoardings fastened to
structures erected on land acquired on lease are moveable.

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 Place of Supply

Hoardings are "goods", the definition in the Sale of Goods Act,

1930, could be considered for determining whether the
hoardings in question were "goods”
If hoardings are moveable, then the place of supply will be governed
by the provisions of section 12(2) of the IGST Act, where services
made to a registered person shall be the location of such person.
Location of registered recipient is location where registration is
obtained. In such case, the place of supply will be location of
Mumbai dealer, i.e., Mumbai. In this situation, IGST will be
chargeable by the Hyderabad dealer, being an inter-State
transaction.
Q439. Freight Forwarder (X) located in Delhi is currently raising debit
note to its foreign agents in China for services provided and
consideration is received in foreign exchange. What will be the
place of supply in case of the above service
Ans. For the purpose of this query, it is assumed that the freight forwarder
provides transportation services. Accordingly, the answer to the
above question is given under the following two scenarios, i.e.,
where the service is provided by the freight forwarder on its:
A. “Own Account” or
B. An “Intermediary”.
A. Own Account
Section 13 of the IGST Act, is the relevant section to determine the
place of supply of services where the location of supplier or location
of recipient is outside India
According to section 13(9) of the IGST Act, the place of supply of
service of transportation of goods, other than by way of mail or
courier, shall be the place of destination of such goods.
A freight forwarder could be providing domestic transportation within
taxable territory (say, from the exporter’s factory located in Pune to
Mumbai port) as well as international freight service (say, from
Mumbai port to the international destination), under a single
contract, on his own account (i.e. he buys-in and sells freight
transport as a principal), and charges a consolidated amount to the
agents in India. In this situation, ideally the place of supply should
be outside India. Therefore, the supply would be an inter-State

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Practical FAQ’s under GST

supply. It would be possible to claim the benefit of export of

services, subject to fulfilment of the relevant conditions provided
below.
Qualification of Export of services
Section 2(6) of the IGST Act, defines “export of services as follows:
“(6) “export of services” means the supply of any service when,––
(i) the supplier of service is located in India;
(ii) the recipient of service is located outside India;
(iii) the place of supply of service is outside India;
(iv) the payment for such service has been received by the
supplier of service in convertible foreign exchange or in
Indian rupees wherever permitted by the Reserve Bank of
India; and
(v) the supplier of service and the recipient of service are not
merely establishments of a distinct person in accordance
with Explanation 1 in section 8”
B. An Intermediary
Section 2(13) of the IGST Act, defines Intermediary services as
follows:
“intermediary means a broker, an agent or any other person, by
whatever name called, who arranges or facilitates the supply of
goods or services or both, or securities, between two or more
persons, but does not include a person who supplies such
goods or services or both or securities on his own account”
The place of supply in case of “Intermediary” service is provided in
section 13(8) of the IGST Act, as “Location of supplier of service”.
If the freight forwarder carries the service as agent or facilitates the
service of freight forwarding between two or more persons and
doesn’t supply on its own account, the transaction would be subject
to CGST & SGST as the place of supply is the location of service
provider which is India in this scenario.

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 Place of Supply

Q440. What is the place of supply for bank guarantee established by

parent company overseas and facilitation fee paid to overseas
vendor for the bank guarantee utilised by subsidiary in India.
Whether this is liable to tax under GST?
Ans. ⚫ In order to fall within the chargeability of GST, the activity
performed shall fall within the definition of “supply” in terms of
section 7 of the CGST Act. An activity shall qualify as a “supply”
in terms of section 7 of CGST Act only if all the conditions
specified therein are satisfied.
⚫ In terms of Explanation (a) to section 15 of the CGST Act,
persons shall be deemed to be “related persons” if––
(i) such persons are officers or directors of one another’s
businesses;
(ii) such persons are legally recognised partners in business;
(iii) such persons are employer and employee;
(iv) any person directly or indirectly owns, controls or holds
twenty-five per cent. or more of the outstanding voting
stock or shares of both of them;
(v) one of them directly or indirectly controls the other;
(vi) both of them are directly or indirectly controlled by a third
person;
(vii) together they directly or indirectly control a third person;
or;
(viii) they are members of the same family;
In accordance with the above, parent company and subsidiary
company shall be considered as related persons.
• Entry No. 2 of Schedule I of the CGST Act, provides that supply
of goods or services or both between related persons, when
made in the course or furtherance of business shall be treated
as a supply even if made without consideration.
• In case of Olam Agro India Limited v. Commissioner of
Service Tax, Delhi – I [2014(33) S.T.R. 251 (Tri.-Del.)], the
Delhi Tribunal held: “Prima facie, such corporate guarantee

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Practical FAQ’s under GST

constitutes a service provided by the Singapore entity to the

petitioner for facilitating its business for procurement of
indigenous agricultural produce, etc. for the purpose of its
export. Ld. Counsel for the petitioner has contended, a
contention that did not find favour with the adjudicating
authority, that extending of corporate guarantee by the
Singapore corporate entity to Indian bank is akin to providing
bank guarantee, a service falling within Banking and other
Financial Services defined in section 65(12) of the Act (business
auxiliary service).”
• Further, Circular No.34/8/2018-CGST dated 01.03.2018 issued
by the Central Government provides the following:

Sl. Issue Clarification

No.
4 (2) Whether the (2) The service provided by
guarantee provided by Central Government/ State
State Government to Government to any business
State owned entity including PSUs by way
companies against of guaranteeing the loans
guarantee taken by them from financial
commission, is taxable institutions against
under GST? consideration in any form
including Guarantee
Commission is taxable.

• In the present case, the parent company has provided a

guarantee to subsidiary company and the facilitation fee is paid
by subsidiary company to parent company for provision of said
service. Given the present fact pattern and drawing parallel view
from the above judicial precedent, it may be inferred that Bank
guarantee extended by parent company to a vendor in favour of
subsidiary company, is being considered as supply of service by
parent company to subsidiary company by virtue of
guaranteeing, the repayment of the loans/borrowings to the
vendors abroad in case of default by subsidiary company. The
entities involved in the said transaction are related persons as
explained above and thus by virtue of Entry No. 2 of Schedule I

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 Place of Supply

of the CGST Act, extending the bank guarantee will constitute a

supply even if there is no consideration charged. Hence, GST
shall be applicable.
• Further, in terms of Entry No. 4 of Schedule I of the CGST Act,
Import of services by a person from a related person or from
any of his other establishments outside India, in the course or
furtherance of business shall be considered as a supply even if
made without consideration. In the instant case, the subsidiary
company is availing the service of bank guarantee from parent
company overseas and the same shall be considered as import
of services and GST shall be payable under RCM.
• In terms of section 13(2) of IGST Act, the place of supply of
services shall be the location of the recipient of services where
the location of the supplier of services or the location of the
recipient of services is outside India. Therefore, the place of
supply shall be the location of subsidiary company in India.
Q441. X. located in Mumbai places a purchase order for procurement
of material from Y of China and directs Y to supply goods
directly to Z of South Africa; the bill is raised by X to Z.
What will be the place of supply in the above case?
Ans. ⚫ Transactions taking place before filing of bill of entry are termed
as “high sea sale” transactions under common trade practice
where the original importer sells the goods to a third person
before the goods are entered for customs clearance.
In the present case, the goods would never be imported into
India (i.e., are directly supplied from China to South Africa). This
situation is covered under Entry No. 7 of Schedule III
ACTIVITIES OR TRANSACTIONS WHICH SHALL BE
TREATED NEITHER AS SUPPLY OF GOODS NOR A SUPPLY
OF SERVICES of the CGST Act which inter alia stated “Supply
of goods from a place in the non-taxable territory to another
place in the non-taxable territory without such goods entering
into India.”
⚫ The above transaction is not even a “supply” as per GST Law.
Thus, the question of place of supply will not arise. As stated,
the transaction would not be subject to GST.

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Practical FAQ’s under GST

Q442. Commission invoice is raised by an Indian subsidiary company

in Gurgaon, Haryana on parent company outside India for
goods purchased from outside India and sent directly from
outside India to the parent company outside India. What will be
the place of supply in this case?
Ans. ⚫ The Indian subsidiary company in the present case acts as an
“Intermediary” between the parent company and the seller of the
goods.
⚫ Section 2(13) of IGST Act defines Intermediary services as
follows:
“intermediary means a broker, an agent or any other
person, by whatever name called, who arranges or
facilitates the supply of goods or services or both, or
securities, between two or more persons, but does not
include a person who supplies such goods or services or
both or securities on his own account.”
• The place of supply in case of “Intermediary” service is provided
in section 13(8) of the IGST Act is “Location of supplier of
service”.
• Since the Indian subsidiary would qualify as an “intermediary”,
the transaction would be subject to CGST and SGST as the
place of supply in such cases is the location of service provider
(i.e., the Indian subsidiary).
Q443. What are the consequences of wrong payment of tax due to
mistake in identifying the correct place of supply?
Ans. As per section 77 of the CGST Act, where a registered taxable
person who has paid the CGST & SGST/UTGST considering a
transaction to be an Intra- State supply but subsequently such
transaction is held to be an Inter-State supply, then IGST shall be
payable (with no interest) and refund of CGST & SGST/UTGST
could be claimed under the provisions of the respective Act..
In the same line, section 19 of the IGST Act, provides for refund of
IGST and payment of correct tax i.e. CGST & SGST/UTGST.
1. Correct tax would be required to be paid.

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2. Proof of correct tax to be submitted to PTO.

3. On the weightage of the proof of correct tax having been paid,
application for refund of the wrongly paid tax shall be made.
Therefore, it becomes most important and critical to correctly
determine the nature of supply.
Note: If amount has been deposited in the electronic cash ledger
under a wrong head, before set off - there is an option to transfer the
amount to the correct head by filing FORM GST PMT-09.
Q444. X is in retail business; customers from other State come to X’s
Store and purchase the goods and ask X to send it to their
home State. In that case what will be place of supply?
Ans. Where the supply involves movement of goods, the place of supply
of such goods shall be the location of the goods at the time at which
the movement of goods terminates for delivery to the recipient. In
this case the place of supply will be the place where goods are
delivered.
Q445. A, registered seller in Delhi sold goods to B, unregistered buyer
of Uttarakhand, but the goods have been delivered in Assam
(AS). What will be the place of supply?
Ans. If the goods are supplied by the supplier to the recipient on the
direction of a third person, it will be deemed that the third person
has received the goods, and the place of supply will be the principal
place of business of such third person.
Place of supply for “Bill to Ship to” transactions have been defined
under GST under Section 10(1) (b) of the IGST Act:
“(b) where the goods are delivered by the supplier to a recipient
or any other person on the direction of a third person, whether
acting as an agent or otherwise, before or during movement of
goods, either by way of transfer of documents of title to the
goods or otherwise, it shall be deemed that the said third person
has received the goods and the place of supply of such goods
shall be the principal place of business of such person;”
In this case the place of supply will be Uttarakhand.

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Q446. A person is engaged in identifying students for enrolling to the

course conducted by Foreign University. Whether it will fall
within the limb of section 13(8) (b) of the IGST Act and be
determined as the place of supply in India?
Ans. ⚫ In terms of section 2(13) of IGST Act – ““intermediary” means a
broker, an agent or any other person, by whatever name called,
who arranges or facilitates the supply of goods or services or
both, or securities, between two or more persons, but does not
include a person who supplies such goods or services or both or
securities on his own account;”
• Further, in terms of section 13(8) (b) of IGST Act the place of
supply of the intermediary services shall be the location of the
supplier of services.
• In the instant case, the person is providing the services of
identifying and enrolling the students to the course conducted
by Foreign University.
• If the person is providing such services on his own account,
then place of supply of such services shall not fall under section
13(8) (b) of the IGST Act and the place of supply shall be the
location of recipient of services as per section 13(2) thereof.
However, if the person is providing the said services on behalf
of Foreign University, then the place of supply shall be
determined as per Section 13(8) (b) of the IGST Act.
Q447. A Ltd., a delivery company having registered office in
Bengaluru, collect all the goods from Clipkart in their Hubs and
deliver to final customers. What will be the place of supply?
Ans. (a) Where a service is provided to a registered person, the place of
supply shall be the location of such recipient; [ Section 12(2)(a)
of the IGST Act]
(b) Where service is provided to an unregistered person, then place
of supply shall be the:
(i) Location of the service recipient if the address is available
on record;

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(ii) Otherwise location of service provider – [Section 12(2)(b) of

the IGST Act].
Since in this case the service is provided to a registered person i.e.,
Clipkart, the place of supply will be the registered address of
Clipkart.
Q448. X., a resident of Noida, U.P., went to Himachal Pradesh for a
family vacation via Delhi-Chandigarh-Himachal Pradesh in his
own car. After entering Chandigarh, his car broke down due to
some technical issue. He called ˜CROSSROARDS" - an
emergency roadside car assistance company (registered under
GST in Delhi) to repair the car. The car was repaired by the staff
of "CROSSROADS". The value of supply amounted to ` 50,000
(being labour charges ` 40,000 and spares ` 10,000). The bill
was supposed to be generated online though the server, but
due to some technical issue, it was not so generated. What will
be the place of supply in the given case?
Ans. Services supplied to an individual, represented either as the
recipient of services or a person acting on behalf of the recipient,
which require the physical presence of the recipient or a person
acting on his behalf, with the supplier for the supply of services.
In this case place of supply will be Chandigarh as this is
performance based services.
Q449. X, a Director of ABC Ltd. which is registered in Delhi goes to
Mumbai and stayed in a Five Star hotel. What will be the place
of supply of service to X?
Ans. The place of supply of services by way of lodging accommodation by
a hotel, shall be the location at which the immovable property (hotel)
is located or intended to be located, as per section 12(3) (b) of the
IGST Act. In this case the place of supply will be Mumbai and CGST
and SGST will be charged.
Q450. What is the relevance of address of delivery? What will be the
place of supply in case of vehicle, if it is sold in Karnataka by a
dealer in Maharashtra and the vehicle is supposed to be
registered with Karnataka RTO?

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Ans. As per section 2(2) of the CGST Act, address of delivery means the
address of the recipient of goods or services indicated on the tax
invoice issued by a registered person for delivery of such goods or
services or both. If a dealer in Maharashtra, supplies a vehicle to a
recipient in Karnataka and the vehicle is to be registered in
Karnataka, the goods are transported by the dealer to the location of
recipient, the place where the movement terminates for delivery,
shall be the place of supply as per section 10(1) (a) of the IGST Act.
Hence in this case the place of supply will be Karnataka.
Q451. A photographer in Karnataka had rendered wedding
photography services to a NRI (native of Tamil Nadu) in
Chennai as well as in Australia. What will be the place of
supply?
Ans. As per section 13(5) of the IGST Act, the place of supply of services
supplied by way of admission to, or organisation of a cultural,
artistic, sporting, scientific, educational or entertainment event, or a
celebration, conference, fair, exhibition or similar events, and of
services ancillary to such admission or organisation, shall be the
place where the event is actually held.
Photography service to wedding is ancillary to an event or
celebration.
Further, as per section 13(6) of the IGST Act, where any services
referred to in sub-section (3) or sub-section (4) or sub-section (5) is
supplied at more than one location, including a location in the
taxable territory, its place of supply shall be the location in the
taxable territory.
In this case, the service has been rendered in Chennai (a location in
taxable territory). Hence, place of supply shall be Chennai, Tamil
Nadu.
Q452. A transporter is providing Good Transport Agency (GTA)
services for supply of goods to Emazon (registered and
situated in Karnataka). The GTA supplies goods to customers,
who are located within the city of Andhra Pradesh. What will be
the place of supply?
Ans. In the case of any services provided by a supplier, where the
supplier and recipient of supply are located in India, in relation to

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transportation of goods the place of supply for such services will be

determined as per section 12(8) of the IGST Act. As per sub-clause
(a) to the said section, in case of transportation of goods, if the
supply of transportation services is made to a registered person, the
place of supply is the location of such recipient. Hence, the GTA
who transports goods within the State of Andhra Pradesh, supplies
services for and on behalf of a recipient located in Karnataka, who is
a registered person and the place of supply will be the place where
the recipient is located i.e. Karnataka. As the location of supplier
and place of supply are in different States, the nature of supply will
be inter-State supply and the supplier is liable to pay IGST.
Q453. In case of GTA services where the liability is on RCM basis,
how the place of supply will be determined?
Ans. The provisions relating to e place of supply remain the same
whether the GST liability is covered under the forward charge or
RCM, Hence, the provisions of section 12(8) (a) of the IGST Act
would be applicable in this case. In relation to transportation of
goods, any services provided by a supplier, where the supplier and
recipient of supply are located in India, the place of supply for such
services will be determined as per section 12(8)(a) of IGST Act. i.e.,
if the supply of transportation of goods is made to a registered
person, place of supply is the location of such recipient. Hence, in
case of RCM, the place of supply will be the location of the recipient,
who is generally registered as a person liable to pay tax under RCM
as per section 24 of the CGST Act.
Q454. What is the place of supply in case of intangibles classified as
services under GST?
Ans. Where intangible assets are being given for temporary transfer or
permitted use, then it will be treated as services. Once it is
determined that intangible assets as service, then provisions of
sections 12 and 13 of the IGST Act will apply for determining the
place of supply of the Services.
The Rules applicable for supply of intangible assets would mainly
fall in the residuary category. Hence, as per rule 12(2) of the IGST
Rules, place of supply of services, where both, location of supplier &
location of Recipient are in India will be as under:

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Sl. No. Type of Supply Place of Supply

1. Services are provided to a Location of the
registered recipient registered recipient
2. If the service provided to other
than registered person:
(a) If location of the recipient of Location of the
service is available on record recipient
of the supplier
(b) Otherwise Location of supplier of
service.
However, if either the location of supplier or the location of
recipient fall outside India the provision of rule 13(2) of the IGST Act,
will prevail where:
• Place of supply of services shall be the location of the recipient
of services
• Where the location of the recipient of services is not available in
the ordinary course of business then, the place of supply of
services - shall be the location of the supplier of services.
Q455. Installation services provided on goods by a service provider in
Delhi, who installs some cameras at a site in Delhi, for and on
behalf of a service recipient who has a place of business in
Andhra Pradesh. Whether the place of supply will be Delhi or
Andhra Pradesh. The supplier invoice is only for installation
charges as goods belong to service recipient as there is no sale
of goods here.
Ans. In case of any services provided by a supplier, where the supplier
and recipient of supply are located in India, in relation to installation
services provided on goods, the place of supply will be determined
as per section 12(2) of the IGST Act. As the specified service is not
covered by any other sub-section of the said section, the location of
recipient is place of supply. In case of installation services provided
on goods supplied by the recipient, the place of supply will be
location of the recipient, irrespective of the place where the goods
are been installed. Therefore, in this case, the place of supply will be
Andhra Pradesh.

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Q456. A supplier is a real estate agent in Sikkim; the recipient is also

in Sikkim, but the property is located in Odisha, which is the
property intended to be purchased by the recipient what would
be the place of supply?
Ans. In case of any services provided by a supplier, where both the
supplier and the recipient of supply are located in India, in relation to
immovable property based service, the place of supply will be
determined as per section 12(3) (a) of IGST Act. The place of supply
of services directly in relation to an immovable property, including
services provided by experts or estate agents, shall be the location
at which the immovable property is located or intended to be
located. In the given case as the services provided by the supplier is
by way of real estate agent service and the property which is
intended to be purchased is located in Odisha, the place of supply
for the said services will be location of immovable property which is
Odisha.
Q457. A Ltd., located in India enters into an agreement with B Inc., in
USA to provide scientific testing in India. B Inc., in turn
sub-contracts the service to C Inc., in USA. C Inc., sends an
employee to India to provide the service in India. What would be
the place of supply for the service provided by C to B? Is B or C
are required to obtain registration in India?
Ans. To understand, the query better let us re-draft the query as under-
(a) C Inc. of USA, a non-resident is providing testing services on
goods situated in India to B. Inc. of USA, a non-resident.
(b) B Inc. of USA, a non-resident is providing testing services on
goods situated in India to A Ltd. of India.
Registration Issue
In terms of Section 2(77) of the CGST Act, “non-resident person”
requires registration in case he undertakes occasional transactions
involving supply of goods or services. As such, both C Inc. and B
Inc. require registration in India.
Place of Supply Issue
Situation (a):
In this case, the place of supply is in India in terms of section 13(3)(a)

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of the IGST Act. However, since the recipient of service is outside

India, in spite of the fact that the place of supply is in India, IGST will
be chargeable in terms of the provisions of section 7(5)(c) of the
IGST Act.
Situation (b):
In this case, the place of supply is in India in terms of
section 13(3)(a) of the IGST Act and the recipient is also located in
India; therefore, CGST/ SGST would be applicable.
Q458. A tax consultant has made the income tax computation and
determined the tax payable by an individual and supports the
individual in filing his income tax return. The PAN jurisdiction
of such individual is different from the location of recipient as
per records available with the supplier of service. Whether
CGST/ SGST would be charged or IGST if PAN has jurisdiction
in other State?
Ans. In case of any services provided by a supplier, where the supplier
and recipient of supply are located in India, and the service is not
covered by sub-sections (3) to (14) of section 12 of the IGST Act,
the place of supply will be determined as per section 12(2) of IGST
Act, which will be the location of the recipient. In respect of the
services by the tax consultant to an individual who is registered with
GST, the place of supply of service will be location of such
registered person. In case the recipient is not registered, the
location of recipient as per address on record with the supplier will
be place of supply. In case of any dispute between address on
record of supplier and the actual jurisdiction of PAN, the place of
supply will be determined as per address on records of the recipient,
with the supplier.
Q459. What is the place of supply of conference event held in say
Mumbai and delegates attending from all over India? Also, what
is the place of supply of stall rentals received from various
companies putting up stalls in the said event to exhibit or sell
their products?
Ans. Let us assume that both the supplier of services as well as recipient
of services are situated in Mumbai. The delegates and the
companies who wish to put up stalls in the conference are from all

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over India. Both the supplier and recipient of service are registered
in Mumbai. Various companies who wish to put up stalls are also
registered across India. In this case, in terms of the provisions of
section 12(7) of the IGST Act, the place of supply in relation to
organisation of a conference would be Mumbai. In respect of
organization of an event in immovable property, the service of
booking the location will be determined in terms of section 12(3) of
the IGST Act, but the organization of the event will fall under section
12(7) of the IGST Act. Services by way of admission to an event will
fall under section 12(6) of the IGST Act, and the services of
organization of an event, will be covered by section 12(7) of the
IGST Act. Similarly, the place of supply in relation to booking of
stalls will fall under section 12(3) of the IGST Act.
Q460. D Ltd, is a PAN India maintenance service provider located in
Tamil Nadu and sends spare parts to his authorised service
providers across India based on delivery challan, upon payment
of necessary GST. He has some stock at service location in
Maharashtra valued at ` 10 Lacs. D Ltd decides to sell his PAN
India stock to E Ltd, in Karnataka who also will continue to take
the service from same authorised service provider in
Maharashtra. No movement of spare parts is required and only
transfer of title is needed. The stock is based out in
Maharashtra, the seller is in Tamil Nadu and the buyer is in
Karnataka.
(i) What will be the place of supply for spare parts?
(ii) Can IGST invoice for `10 lacs be issued, without generation
of e-way bill?
Ans. 1. In case of supply of goods, where the goods do not involve
movement either by the supplier, recipient or any other person
the place of supply will be determined as per section 10(1) (c) of
the IGST Act, which will be the place where the goods are
located at the time of delivery.
2. In the above case, the goods of D Ltd. are located in
Maharashtra and the goods do not involve movement, when
such goods are sold to a buyer in Karnataka. The place of

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supply for this transaction will be the place where the goods are
located, which is Maharashtra. Since the location of supplier
and place of supply are in different States, the said supply will
be an inter-State supply and as the goods do not involve
movement through a motorised conveyance, generation of
e-way bill is not mandatory.
Q461. A company paid membership fee related to their business, to an
association located outside India, say in USA. Whether the
place of supply is in India and the Indian company has to pay
RCM for subscription of membership.
Ans. In case of any services where the supplier or recipient of such
service is located outside India, the place of supply will be
determined as per section 13 of the IGST Act. Generally the place of
supply of services as per section 13(2) of the IGST Act shall be the
location of recipient, when the said services are not covered by
sub-clause (3) to (13) of section 13 of the IGST Act. In the instant
case, the services provided by the association located outside India,
are not covered by the specified services and hence the place of
supply will be the location of recipient which is India. Therefore the
Indian company is liable to pay tax under RCM.
Q462. A who is a non-resident Indian, owns an immovable property in
India. How to determine the location of supplier? If such
immovable property is tied-up with an aggregator like LOYO,
who is facilitating a room service in Mumbai and how will the
place of supply will be determined?
Ans. As per section 2(15) of the CGST Act, the location of supplier means
the place which a registered person uses for supply of his service,
when the services are provided from a fixed establishment, other
than the registered place of business, then one which is most
directly connected with business, if all the above places is not
available, the usual place of residence, will be location of supplier. In
the give case, the immovable property in India will be a fixed
establishment and the location of supplier will be in India. In case of
any services in connection with immovable property the place of
supply as per section 12(3) of the CGST Act, will be the location of
the immovable property, irrespective of the fact whether the services
are provided to e-commerce operator or customers.

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Q463. What shall be place of supply in case equipments are given on

hire by a person (located in State A) to a contractor (located in
State B) for construction of immovable property situated in
State A?
Ans. In case of any services provided by a supplier, where the supplier
and recipient of supply are located in India, and the service is not
covered by sub-sections (3) to (14) of section 12 of the IGST Act,
the place of supply will be determined as per section 12(2) of the
IGST Act, which will be the location of recipient. In respect of the
services by the supplier to the recipient who is registered with GST,
the place of supply will be the location of such registered person. In
case the recipient is not registered, the location of recipient as per
address on record with the supplier will be place of supply.
Q464. A hospital in India enters into a contract with a hospital in
Singapore to provide opportunities to foreign doctors, to
observe various kinds of eye surgeries conducted in the Indian
hospital and also to train them in this regard. The consideration
is paid in convertible foreign exchange. The foreign doctors
visit India and get trained in eye surgery. The said contract is
also approved by the Governments of both the countries. Can
this activity be treated as export of service? As the training is
taking place in India, will it be regarded as a taxable supply in
India?
Ans. In case of any services, where the supplier or recipient of such
service are located outside India, the place of supply will be
determined as per section 13 of the IGST Act. Generally, the place
of supply of services as per section 13(2) of the IGST Act shall be
the location of recipient, when the said services are not covered by
sub-clause (3) to (13) of section 13 thereof.
In the instant case, the services provided by the Indian hospital, will
permit the foreign doctors to be present in the operation theatre and
observe the eye surgeries. Such training services are covered by the
specified services [Section 13(3) of the IGST Act]. Hence the place
of supply will be the location where the services are provided to the
representative of recipient which is India and it will not be
considered as an export of service.

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Q465. A registered person providing web development/software

development activities for a USA based Company in USA from
India. Whether it qualifies as export of service?
Ans. In the given case, the supplier of service is located in taxable
territory and is engaged in web development and software
development. The recipient of service is located outside India and
hence the Place of supply will be determined by section 13 of the
IGST Act. As per section 13(2) of the IGST Act, the place of supply
of service is the location of the recipient of services i.e. outside the
taxable territory provided the conditions as prescribed in section 2(6)
of the IGST Act are satisfied.
Q466. What will be the place of supply where the transportation of
goods is to a place outside India? From which date this proviso
to section 12 (8) of the IGST Act was made effective?
Ans. In relation to place of supply for transportation of goods to a place
outside India, a proviso to section 12(8) of the IGST Act has been
inserted vide IGST (Amendment) Act, 2018, which came into effect
from 01-02-2019 onwards, affirming that the place of supply shall be
the place of destination of such goods.
Q467. What will be the place of supply where flight tickets are booked
for return journey also?
Ans. Section 12(9) of the IGST Act, deals with the place of supply of
passenger transportation, where it is provided that the place of
supply of passenger transportation service to a registered person,
shall be the location of such person and for other than registered
person shall be the place where the passenger embarks on the
conveyance for a continuous journey.
If flight tickets are booked for return journey also the place of supply
will be the location of registered person if such person is registered
and for other than registered person it shall be the place where the
passenger embarks on the conveyance the journey.
Q468. Whether samples sent outside India by a registered person will
be liable to GST? No AWB had been issued. What is the place of
supply?
Ans. In case any goods are sent outside India, the proof of export (usually
a shipping bill or AWB) is a must to establish the same. In the

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absence of the same, the establishment of export shall not be

possible and in such cases, section 17(5) (h) would require reversal
of input tax credit availed earlier on such goods as disposal of goods
as samples. However, in any case, since there is no consideration,
there cannot be a supply and in the absence of a supply, there is no
requirement of identifying place of supply.
Q469. The service provider in India [Customs House Agent (CHA)]
performs clearing activity on behalf of a recipient who is
another CHA in Dubai. The consideration was received in
convertible foreign exchange. What will be the place of supply
for the activity performed by Indian CHA and whether this will
be an export of service?
Ans. In case of any services where the supplier or recipient of such
service is located outside India, the place of supply will be
determined as per section 13 of the IGST Act. Generally, the place
of supply of services as per section 13(2) of the IGST Act shall be
the location of recipient, when the said services are not covered by
sub-clauses (3) to (13) of Section 13 of the IGST Act. In the instant
case, the services provided by CHA in India, is in relation to
handling of goods as a CHA, which is a specified service as per
section 13(3) of the IGST Act. The place of supply shall be the place
where the goods are located and hence the place of supply of
service will be India. The said supply of service will not be
considered as an export of service, as the place of supply is in India.
Q470. The place of both supplier and recipient is in Tamil Nadu and
location of goods which are covered under this supply is at
Karnataka. What is the nature of supply and what tax will have
to be charged by the supplier if there is no movement of
goods?
Ans. In case of supply of goods, where the goods do not involve
movement either by the supplier, recipient or any other person the
place of supply will be determined as per section 10(1) (c) of the
IGST Act, which will be the place where the goods are located. In
the above case, the place of supply will be the place where the
goods are located, which is Karnataka. As per section 7 of the IGST
Act, if location of supplier and place of supply is in different state,
the said supply will be an inter-State supply.

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Q471. What is the place of supply in a scenario where the repair and
renovation work, involving transfer of goods is executed at a
State (say Punjab) different from the State of the service
provider and recipient (say Mumbai)?
Ans. Since, Entry 6 (a) to Schedule II of the CGST Act treats works
contract as defined in clause (119) of Section 2 as a supply of
service, there is a clear demarcation of works contract from other
services. Works contract as defined in the Act is restricted to
immovable property.
Section 12(3) of the IGST Act reads:
“The place of supply of services, –
(a) directly in relation to an immovable property, including
services provided by architects, interior decorators,
surveyors, engineers and other related experts or estate
agents, any service provided by way of grant of rights to
use immovable property or for carrying out or co-ordination
of construction work; or
(b) by way of lodging accommodation by a hotel, inn, guest
house, home stay, club or campsite, by whatever name
called, and including a house boat or any other vessel; or
(c) by way of accommodation in any immovable property for
organising any marriage or reception or matters related
thereto, official, social, cultural, religious or business
function including services provided in relation to such
function at such property; or
(d) any services ancillary to the services referred to in clauses
(a), (b) and (c),
Provided that if the location of the immovable property or boat or
vessel is located or intended to be located outside India, the place of
supply shall be the location of the recipient.
Explanation. - Where the immovable property or boat or vessel is
located in more than one State or Union territory, the supply of
services shall be treated as made in each of the respective States or

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Union territories, in proportion to the value for services separately

collected or determined in terms of the contract or agreement
entered into in this regard or, in the absence of such contract or
agreement, on such other basis as may be prescribed.”
In accordance with (a) and (d), repair and renovation work is a
service provided by the contractor in relation to immovable property
and hence the place of supply for the repairs and renovation work
shall be the location of the immovable property, i.e. Punjab.
Q472. What is the place of supply when pre-marketing services have
been rendered to an overseas client?
Ans. As per section 13(2) of IGST Act, the place of supply of services
except the services specified in sub- sections (3) to (13) shall be the
location of the recipient of services and the Place of Supply is
location of the recipient.
Supply of pre-marketing services to overseas client does not fall
under sub-sections (3) to (13) of section 13, provided the services
provided is not in the nature of an intermediary service.
In the instant case, location of recipient and place of supply being
outside India, it is an inter-State supply and hence IGST is
applicable. If the said service qualifies the conditions of section 2(6)
of the IGST Act, which defines “Export of Service”, then it will be
qualified as zero-rated supply.
Q473. If an insolvency professional service is rendered by a
resolution professional to a corporate debtor registered at
Haryana and its financial creditors are located at different
States, what will be the place of supply?
Ans. As per section 12(2) of the IGST Act, the place of supply of services
except the services specified in sub- sections (3) to (14) made to a
registered person, shall be the location of such person.
Since the services are rendered to the corporate debtor registered at
Haryana, the place of supply shall be Haryana - location of service
recipient (i.e.) corporate debtor's registered place.
Q474. What should be the place of supply in case of tour operator –
would the place of supply be one single place or place of

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supply would be different in respect of each service that has

been offered in a package tour?
Ans. Section 12(2) of the IGST Act, provides that
“The place of supply of services, except the services specified in
sub-sections (3) to (14),––
(a) made to a registered person shall be the location of such
person;
(b) made to any person other than a registered person shall be,––
(i) the location of the recipient where the address on record
exists; and
(ii) the location of the supplier of services in other cases.”
The Place of supply shall be location of recipient. If not traceable,
the place of supply will be location of supplier. In the instant case,
the place of supply in respect of tour operator service would be one
single place depending on the location of the recipient. It would not
be different depending on the package tour offered.
Q475. If a Thailand based subsidiary company is supplying goods in
India through an Indian company for which the Indian company
raises a debit note for the commission portion, what will be
regarded as the place of supply?
Ans. The Indian company facilitates the supply of goods between the
Thailand based subsidiary company and the customer in India and
hence satisfies the definition of intermediary as per section 2(13) of
the IGST Act.
As per section 13(8) (b) of the IGST Act, where the location of
supplier or location of recipient is outside India, the place of supply
for intermediary services is location of the supplier of services.
Hence the place of supply for the commission charged by the Indian
company from its Thailand subsidiary is India, as the said service fall
under the category of intermediary services under section 13(8).
Q476. What is the place of supply in case e-auctioning services for
immovable property provided to a customer?

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 Place of Supply

Ans. Irrespective of whether the auctioned goods are movable or

immovable, for the transaction between the auctioneer and the
buyer of such auctioned items the place of supply is determined
under section 12(2) of the IGST Act, since the services specified are
not covered by sub-sections (3) to (14). The place of supply in case
of e-auctioning services if-
a) made to a registered person shall be the location of such
person;
b) made to any person other than a registered person shall be,–
i) the location of the recipient where the address on record
exists; and
ii) the location of the supplier of services in other cases
Place of supply shall be location of recipient, if the location of
supplier is not traceable.
Q477. X, a registered person in the State of Madhya Pradesh, appoints
clearing and forwarding agent Y, a registered person in the
State of Delhi, for the purpose of import of goods from outside
India. Whether, the supply of service made by a Y to be treated
as inter-State supply or to be treated as import of service?
Ans. Since the said service is not covered under any of the sub-sections
(3) to (14) of section 12 of the IGST Act, the same shall be covered
under section 12(2) thereof.
As per section 12(2) of the IGST Act, the place of supply of service
shall be the location of the recipient of service (i.e. Madhya
Pradesh). Since the location of the supplier (i.e. Delhi) and place of
supply (i.e. Madhya Pradesh) are in two different States, it shall be
treated as an inter-State supply. The said service shall not be
treated as import of service.
Q478. If a truck is purchased from Africa and is sold directly to
Germany by "X", what will be the place of supply if the billing
for the above transaction is done at Surat (Registered Place
of Business of X) and will the transaction be subject to IGST
levy?

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Practical FAQ’s under GST

Ans. As per Entry No. 7 of Schedule III of the CGST Act [Inserted vide the
Central Goods and Services Tax (Amendment) Act, 2018 w.e.f.
1-02-2019], the following activity or transaction shall be treated
neither as a supply of good nor a supply of service:
"Supply of goods from a place in the non-taxable territory to
another place in the non-taxable territory without such goods
entering into India".
Considering the above provision, since the truck is supplied directly
from Africa to Germany, the supply of goods is made without such
goods entering into India. This transaction can neither be considered
as supply of goods nor supply of services.
Q479. If a buyer (registered in Karnataka) pays transport charges to a
GTA (registered in both Karnataka and Gujarat) for
transportation of goods from the registered premises of the
seller at Gujarat, what would be regarded as the place of
supply?
Would the answer differ if the payment was made by the seller?
Ans. As per section 12(8) of the IGST Act, the place of supply of services
by way of transportation of goods, including by mail or courier, etc.
provided to a registered person, shall be the location of such person.
As the transportation service is provided to the buyer registered at
Karnataka, the place of supply shall be Karnataka. However, if the
payment was made by supplier who is registered at Gujarat, the
Place of Supply would have been Gujarat.
Q480. What is the place of supply if goods are sold by a Mumbai
registered diamond dealer at an exhibition at Delhi (where he is
not having any place of business) to a customer located in
Gujarat?
Ans. Section 10(1) (c) of the IGST Act provides:
“Where the supply does not involve movement of goods,
whether by the supplier or the recipient, the place of supply
shall be the location of such goods at the time of the delivery to
the recipient;”
Applying the above provisions. The place of supply would be Delhi in
the given case.

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NOTE: Section 2(20) of the CGST Act defines casual taxable person
as under:
“casual taxable person” means a person who occasionally
undertakes transactions involving supply of goods or services or
both in the course or furtherance of business, whether as
principal, agent or in any other capacity, in a State or a Union
territory where he has no fixed place of business;”
In case of supply of goods, the location of the supplier is not defined
in the CGST Act. Applying the basic understanding, the location of
the supplier shall be understood as the place from where the goods
are supplied to the recipient. Hence, if the movement of goods is
undertaken to a State, different from the State in which supplier is
having normal registration, and consequently goods are supplied
from there, then such supply can be said to be made in the said
State. If the person does not have a fixed place of business in such
a State and undertakes supply from there occasionally, casual
taxable person registration has to be obtained in such a State. The
diamond supplier would be compulsorily required to register as
casual taxable person effecting taxable supplies. A casual taxable
person has to apply for registration at least 5 days prior to the
commencement of business.
Q481. Service provider “P” is registered in Andhra Pradesh and the
registered service receiver "Q" is located in Gujarat. P provided
earth-work services in Gujarat to Q. In the above case, whether
IGST is to be charged by P to Q?
Ans. As per Para 6 (a) of Schedule II to the CGST Act, works contracts
as defined in section 2(119) of the CGST Act shall be treated as a
supply of services.
There is a clear demarcation of a works contract as a supply of
service under GST.
As per section 12(3) of IGST Act -The place of supply of services,
directly in relation to an immovable property, including services
provided by architects, interior decorators, surveyors, engineers and
other related experts or estate agents, any service provided by way
of grant of rights to use immovable property or for carrying out or co-

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ordination of construction work; [Clause a] or any services ancillary

to the services referred to in clauses (a), (b) and (c) [Clause d] shall
be the location at which the immovable property or boat or vessel,
as the case may be, is located or intended to be located.
The basic meaning attached to earthwork is "engineering works
carried through the processing of parts of earth surface involving
quantities of soil or unformed rocks."
As per section 7(3) of the IGST Act, the transaction is considered as
supply of service in the course of inter-State trade/commerce and is
subject to IGST levy since the service provider P is registered in
Andhra Pradesh and place of supply being at Gujarat.
The place of supply in the above case would be Gujarat since the
earthwork services are rendered in Gujarat.
Q482. What will be the place of supply in case of POS Machine fees
charged by bank?
Ans. Services provided by bank for facilitating a transaction through Point
of Sale Machine are covered under banking and other financial
services. According to section 12(12) of the IGST Act, place of
supply for banking and other financial services shall be the location
of the recipient of services as per the records of the supplier of
services.
In case the location of recipient is not available as per the supplier
records, the place of supply will be the location of supplier of
services.
Q483. What will be the place of supply in case of online training
services to citizens and non-citizens of India?
Ans. Online Training Services to Citizens
Section 12(5) of the IGST Act reads:
“The place of supply of services in relation to training and
performance appraisal to, -
(a) a registered person, shall be the location of such person;
(b) a person other than a registered person, shall be the
location where the services are actually performed.”

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 Place of Supply

Hence, the place of supply for online training services provided to a

person in India is covered under section 12(5) (b) of the IGST Act.
Online Training Services to Non-Citizens (Foreigners):
• Live Class – As per section 13(2) of the IGST Act, place of
supply shall be the location of the recipient of services. If
location of the recipient not available, location of the supplier of
services.
• Recorded Class – As per explanation to section 13(2) of the
IGST Act, the place of supply of online information and
database access or retrieval services shall be the location of the
recipient of services. Hence, the person receiving such services
shall be deemed to be located in the taxable territory, if any two
of the following non- contradictory conditions are satisfied,
namely:
(i) The location of address presented by the recipient of
services through internet is in the taxable territory.
(ii) The credit card or debit card or store value card or charge
card or smart card or any other card by which the recipient
of services settles payment has been issued in the taxable
territory.
(iii) The billing address of the recipient of services is in the
taxable territory.
(iv) The internet protocol address of the device used by the
recipient of services is in the taxable territory.
(v) The bank of the recipient of services in which the account
used for payment is maintained is in the taxable territory.
(vi) The country code of the subscriber identity module card
used by the recipient of services is of taxable territory.
(vii) The location of the fixed land line through which the service
is received by the recipient is in the taxable territory
Q484. What will be the place of supply in case the services are
rendered on” bill to ship to” basis?
Ans. In case services are rendered by the supplier to a person, based on

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the direction of a third person, then it is a scenario of “Bill to Ship to”

transaction.
The CGST Amendment Act, 2018 read with NN 2/2019-CT w.e.f.
1-2-2019 has amended section 16 of the CGST Act whereby,
the following Explanation has been substituted in clause (b) of
sub-section (2):
“Explanation.—For the purposes of this clause, it shall be
deemed that the registered person has received the goods or,
as the case may be, services––
(i) where the goods are delivered by the supplier to a recipient
or any other person on the direction of such registered
person, whether acting as an agent or otherwise, before or
during movement of goods, either by way of transfer of
documents of title to goods or otherwise;
(ii) where the services are provided by the supplier to any
person on the direction of and on account of such
registered person.”;
In the light of the above Explanation, in case of services, the registered
person (original recipient) shall be deemed to have received the
services where the services are delivered by the supplier to any other
person on the direction or instruction of the said registered person
(Recipient).
Hence, the place of supply is the location of the person on whose
direction the service has been rendered.
Q485. A landowner is located and registered in Delhi and owns an
immovable commercial property in Gurugram, Haryana. What
will be place of supply and is he required to obtain registration
in Haryana?
Ans. As per section 2(50); “fixed establishment” means a place (other
than the registered place of business) which is characterised by a
sufficient degree of permanence and suitable structure in terms of
human and technical resources to supply services, or to receive and
use services for its own needs.”

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 Place of Supply

GST is applicable in case of renting of commercial property. To

determine the taxability, the following cases may arise:
In case 1: A has a fixed establishment is in Gurugram and therefore
the location of the supplier will be Gurugram. The place of supply
will be Gurugram (being services related to an Immovable property –
Place of supply is the location of an immovable property). The
supply will be an intra-State supply and A has to obtain the
registration in Haryana.
In case 2: A does not have fixed establishment in Gurugram-
according to Clause (d) of section 2(15) of the IGST Act - residual
clause which says that in the absence of clause (a), (b), (c) being
applicable, the location of usual place of residence shall be the
location of the supplier of services within the meaning of clause (d)
of sec 2(15) thereof.
In case 3: A is located in Delhi, while the place of supply will be
Gurugram (being services related to an Immovable property – Place
of supply of is the location of the immovable property).This supply
will be an intra-State supply of services. The location of the
immovable property is in the State of Haryana and hence this State
assumes jurisdiction to levy and collect the tax. Hence, A has to take
registration in the State of Haryana and charge CGST and SGST.
Q486. A Company in Gujarat has entered into a contract with Sirtel for
supplying bandwidth from Mumbai. The delivery will be at
Hyderabad for our customer and this is a continuous service.
What will be the place of supply?
Ans. In the instant case, though the delivery is at Hyderabad, the location
where the telecommunication line, leased circuit or cable connection
or dish antenna are installed is pertinent to determine the place of
supply.
Section 12(11) of the IGST Act, provides that the place of supply in
case of services by way of fixed telecommunication line, leased
circuits, internet leased circuit, cable or dish antenna, shall be the
location where the telecommunication line, leased circuit or cable
connection or dish antenna is installed for receipt of services.
If the leased circuit is installed in more than one State/Union territory
and a consolidated amount is charged for supply of services, the
place of supply shall be deemed to be in each of the respective

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States/Union territories in proportion to the value for services

determined in terms of the contract or agreement entered into in this
regard.
In the absence of a contract or agreement between the supplier and
recipient of services, the value of services supplied in different
States/Union territories (where the leased circuit is installed) shall
have to be determined in accordance with rule 6 of the IGST Rules
in proportion to the number of points lying in each such State/ Union
territory.
The number of points in a circuit is determined in the following
manner-
(i) In the case of a circuit between two points or places, the starting
point or place of the circuit and the end point or place of the
circuit will invariably constitute two points.
(ii) Any intermediate point or place in the circuit will also constitute
a point provided that the benefit of the leased circuit is also
available at that intermediate point.
Therefore, the place of supply is deemed to be in each of the
respective States/Union territories in proportion to the value for
services determined in terms of the contract or agreement entered
into in this regard, if no agreement then place of supply is
determined under Rule 6 of the IGST Rules.

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Miscellaneous
Q487. Explain the meaning of the term works contract and whether it
is a goods or service?
Ans. Section 2(119) of the CGST Act defines works contract to mean a
contract for building, construction, fabrication, completion, erection,
installation, fitting out, improvement, modification, repair,
maintenance, renovation, alteration or commissioning of any
immovable property wherein transfer of property in goods (whether
as goods or in some other form) is involved in the execution of such
contract.
Only composite contract relating to immovable property are covered
under works contract. It shall be treated as supply of service as per
Entry No. 6(a) of Schedule II of the CGST Act.
Q488. Definition of supply per se does not envisage two persons.
Service definition under service tax envisaged provision of
service by one person to another. So whether two persons are
required for supply.
Whether activities vis-ã -vis club and members is a supply
leviable to GST?
Ans. Supply definition has not emphasized the need for the presence of
two persons as was under the earlier Service Tax Law. However, it
is pertinent to note two things in this respect
(a) Supply cannot be made to oneself (hence captive consumption
is not taxable under GST as was under Central Excise law)
(b) Entire GST Law has reference to supplier & recipient in various
provisions thereby highlighting the requirement of two persons.
Thus it can be concluded that two separate persons are required
under GST Law for supply to materialise.
Further vis-a-vis services between a Club and its members, it is to
be noted that section 2(17) (e) of the CGST Act, defines business to
include “provision by a club, association, society, or any such body
Practical FAQ’s under GST

(for a subscription or any other consideration) of the facilities or

benefits to its members”.
Hence, business encompasses services of clubs to its members
As per the above discussion GST is applicable to the services
between club and its members.
Q489. Activities undertaken by a charitable organization are not in the
course of business. In the light of the specific provision in
Section 7 of the CGST Act, how tax can be levied on the income
like rent etc. earned by such Institutions?
Ans. The term “business” is defined in Section 2(17) of the CGST Act,
includes -
(a) any trade, commerce, manufacture, profession, vocation,
adventure, wager or any other similar activity, whether or not it
is for a pecuniary benefit;
(b) any activity or transaction in connection with or incidental or
ancillary to sub-clause (a);
(c) any activity or transaction in the nature of sub-clause (a),
whether or not there is volume, frequency, continuity or
regularity of such transaction
……….”
As seen above, the term “business” includes any trade, commerce
or any similar activity and the same need not be for any benefit.
Charitable organisations providing certain notified services are
exempted from the levy of GST. However, any business activity
carried out by any charitable organisation(s) such as renting of
property etc., though not in the course of any business in the strict
sense, would be taxable as the said activity etc., would fall under the
purview of the term “business” defined under GST law and thus
chargeable to tax.
Q490. A Pvt. Ltd Company is a kind of an intermediary between
doctors and the patients using its web based portal and has an
app developed for the above services. Whether the service will
qualify as “e-commerce”?
Ans. ⚫ ‘Electronic commerce’ has been defined in section 2(44) of the
CGST Act to mean the supply of goods or services or both,
including digital products over digital or electronic network.

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 Miscellaneous

• ‘Electronic commerce operator’ has been defined in

section 2(45) of the CGST Act, to mean any person who owns,
operates or manages digital or electronic facility or platform for
electronic commerce.
• As per section 24(x) of the CGST Act, the benefit of threshold
exemption is not available to e-commerce operators and they
are liable to be registered irrespective of the value of supply
made by them.
• In the light of the definitions in sections 2(44) and 2(45) of the
CGST Act, The private limited company which has its own
web-based services and specialized App developed to perform
services which will enable a customer to interact with doctor for
consideration act will come under the definition of an “electronic
commerce operator”.
• However, the applicability of GST in the hands of such company
would depend on other factors. Accordingly, no comment is
made on the applicability of GST on the transaction to be
undertaken by the company.
Q491. What is the difference between exempted supply, Nil rated
supply and non-GST supply as per Form GSTR-9 and Form
GSTR-9C?
Ans. Exempted supply is defined in Section 2(47) of the CGST Act, to
mean supply of any goods or services or both which attracts nil rate
of tax or which may be wholly exempt from tax under section 11, or
under section 6 of the IGST Act, and includes non-taxable supply.
Thus exempt supply covers three things:
(i) Supply which is taxable i.e. leviable to tax under the Act but
attracts Nil rate of tax.
(ii) Supply which is taxable i.e. leviable to tax under the Act but has
been made exempt from tax via notification of Government
under section 11 of CGST Act or under section 6 of IGST Act.
(iii) A non-taxable supply:

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Practical FAQ’s under GST

According to Section 2(78) of the CGST Act,

“non-taxable supply” means a supply of goods or services or
both which is not leviable to tax under this Act or under the
IGST Act
A non-taxable supply is a supply of goods or services or both as per
section 7 of the CGST Act but is not taxable under the CGST or
IGST Act. The following transactions are covered under the scope of
non-taxable supply:
i. Alcoholic liquor for human consumption
ii. Petroleum crude
iii. High speed diesel
iv. Motor spirit (commonly known as petrol)
v. Natural gas
vi. Aviation turbine fuel
Nil rated supply is not defined in the GST law. Nil rated supplies are
those which feature in the GST Tariff Notifications but carry a “nil”
rate of tax against the goods or services. There are no nil rated
goods under the GST law as on date. However, there are two nil-
rated services under Headings 9972 and 9986.
Non-GST supply is also not defined in the GST law. Thus, the
general understanding is that transactions which are not covered by
the definition of supply under section 7 of the CGST Act will be
considered as non-GST supplies. Thus, Schedule III transactions
will be considered as non-GST supplies. Further, money and
securities are not covered by the definition of goods or services and
thus, the transactions in money and securities will be treated as
non-GST supplies.
This issue has been dealt in detail in the press release issued by the
CBIC on 3 rd July 2019. Para (f) of the said press release states as
follows:
“It has been represented by various trade bodies/associations
that there appears to be some confusion over what values are to
be entered in Tables 5D, 5E and 5F of FORM GSTR-9. Since,

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there is some overlap between supplies that are classifiable as

exempted and nil rated and since there is no tax payable on
such supplies, if there is a reasonable/explainable overlap of
information reported across these tables, such overlap will not
be viewed adversely. The other concern raised by taxpayers is
the inclusion of ‘no supply’ in the category of non-GST supplies
in Table 5F. For the purposes of reporting, non-GST supplies
include supply of alcoholic liquor for human consumption, motor
spirit (commonly known as petrol), high speed diesel, aviation
turbine fuel, petroleum crude and natural gas and transactions
specified in Schedule III of the CGST Act.”
In this connection, it will be worthwhile to carefully note the
provisions of section 2(47) read with section 2(78) of the CGST Act.
Q492. Explain “Bill to Ship to” model (of supply and its leviablity)
under GST
Ans. Normally in any transaction related to supply of goods and services
or both there are two persons involved, first the supplier and second
the recipient. Goods / Services along with the Bill is supplied /
issued by supplier to recipient.
In “Bill To, Ship To” concept three person are involved; first the
supplier, second the recipient (on whom bill is raised – “Bill To”) and
third the consignee (to whom goods / services are delivered – “Ship
To”). Levy of GST in “Bill To Ship To” transaction is based on the
place of supply of the recipient.
Eg: Ram & Co, Chennai - Supplier, Lakshman & Co., Chennai -
Recipient (Bill To), Sita & Co, Bangalore - Consignee (Ship To)
In the above example it will be an intra-State supply and the place of
supply will be Chennai even though it is delivered at Bangalore.
Ram & Co will raise intra-State supply invoice charging CGST +
SGST to Lakshman & Co. and Lakshman & Co will raise inter-State
supply invoice on Sita & Co.
The invoicing shall be in triplicate for the supply of goods and the
same shall be issued to satisfy both the legs of transactions.
In a nutshell in any Bill To and Ship To transaction there will be
three persons involved and two sets of Invoices will be issued and
levy will be based on the place of recipient for the supplier.

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Q493. Can a Chartered Accountant registered as composition

taxpayer in Kerala undertake audit assignment of bank branch
in Kerala, when head office of the bank is situated outside
Kerala?
Ans. Composition Scheme for a Chartered Accountant who has opted for
it will be governed by the provisions and conditions of
section 10(2A) of the CGST Act. The said scheme is applicable for
intra-State supply only and one of the conditions is that the supplies
to be eligible for the scheme should be made by a registered person
who is not engaged in making any inter-State outward supply.
Accordingly, the Chartered Accountant cannot accept any
assignment that would be inter-State supply if he wants to continue
to be under the composition scheme.
The audit assignments of bank branches are usually arrangement
between Head Office of the bank who engages selected CA Firms
for auditing branches and scope of work, terms, remuneration etc.
are decided between the Head Office and CA Firm. The Head Office
is also responsible for paying consideration, that is, agreed
remuneration to the CA Firm, although work is physically carried out
at branch - in the instant case located in Kerala. As per
section 2(93) of the CGST Act, the Head Office being the person
liable to pay consideration will be “recipient” of Chartered
Accountant’s service and not the branch. The Head Office, recipient
of services in this case, is situated in a State other than Kerala, and
for GST purposes would obviously be a different registered person
than the branch in Kerala.
The provisions under the IGST Act determine the nature of supply –
whether intra-State or inter-State. As per provisions of section 12(2)
read with provisions of section 7(3) thereof, the transaction in
question is supply of service during inter -State trade or commerce.
This is because the places of supply – recipient (Head Office)
location, out of Kerala, and the place of supplier – Chartered
Accountant in Kerala, are in two different States.
As mentioned earlier, one of the conditions for being eligible for the
composition scheme is that the supplier should not be engaged in
making any inter- State outward supplies. By accepting branch audit

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 Miscellaneous

work of a branch in Kerala of a bank whose head office is located

outside Kerala, which would be inter- State supply, the Chartered
Accountant would lose his eligibility for the composition scheme.
However, in case any assignment including for audit has been
agreed upon with the bank branch itself, where the remuneration
would also be agreed and payable by the branch, the branch would
be recipient of service and it would be a case where recipient is
located in Kerala where the supplier Chartered Accountant is also
located. In terms of section 8 (2) of the IGST Act, it would be case
of intra – State supply of service and such service would be covered
under the scope of composition scheme.
Q494. An entity is manufacturing exempted goods and has multi-State
operations. Since, there is no taxable supply (outward supply) /
entities where setoff is ultimately blocked, cross charge lead to
cascading of tax. How to deal with such situations.
Ans. ⚫ The necessity for "cross-charge" arises from the deeming of
each registration of a person as "distinct entities" (Section 25 of
the CGST Act,) and hence supplies between them become
taxable. GST being a destination/consumption-based tax, the
intent of this deeming fiction is to ensure a seamless chain of
Input Tax Credits so that they accrue to the State where the
goods or services are finally consumed.
⚫ Where ITC is blocked / restricted for an entity, the tax paid on
the "cross-charge" supplies received by a branch can become a
cost included in the pricing of the final supply of goods or
services. In Industries where the final outward supplies are
taxable, but with restriction of ITC availment, such cross-charge
can lead to cascading effect of tax.
Example: Delicious Foods Private Limited is into business of
operating restaurants in Chennai (Head office) and Delhi
(Branch office) where the outward supplies are taxed at 5% with
restriction on availment of ITC. Now when Chennai – HO cross
charges for common services to Delhi BO, Delhi BO shall pay
GST on such cross charges and claim ITC. Such ITC as
restricted shall be added to the cost of outward supplies made

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in the restaurants to final consumers who will pay tax on such

added costs and hence leading to cascading of taxes.
⚫ However, in an industry where the final outward supplies are
exempt, the question of cascading effect (tax on tax) does not
arise as there is no fresh tax getting levied on the tax cost
included in the pricing due to ITC restrictions.
Example: Delicious Milks Private Limited is into business of
fresh milk in Chennai (Head office) and Delhi (Branch office)
where the outward supplies are exempted and hence no
availment of ITC. Now when Chennai – HO cross charges for
common services to Delhi BO, Delhi BO shall pay GST on such
cross charges and shall not claim ITC of the same as outward
supplies are exempted. Such non-availability of ITC shall be
added to the cost of outward supplies of fresh milk to final
consumers and hence there is no cascading of taxes as the
supplies are exempt.
Q495. Is HUF a recognized entity under GST law?
Ans. As per section 22 of the CGST Act (persons liable for registration),
every supplier shall be liable to be registered under this Act in the
State or Union Territory, from where he makes a taxable supply of
goods or services or both……………..
As per section 2(105) of the CGST Act, supplier in relation to any
goods or services or both, shall mean the person supplying the said
goods or services or both and shall include an agent acting as such
on behalf of such supplier in relation to the goods or services or both
supplied.
As per section 2(84) of the CGST Act-
“person” includes —
(a) an individual;
(b) a Hindu Undivided Family;
(c) a company;
(d) a firm;
(e) a Limited Liability Partnership;

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(f) an association of persons or a body of individuals, whether

incorporated or not, in India or outside India;
(g) any corporation established by or under any Central Act,
State Act or Provincial Act or a Government company as
defined in clause (45) of section 2 of the Companies Act,
2013 (18 of 2013);
(h) any body corporate incorporated by or under the laws of a
country outside India;
(i) a co-operative society registered under any law relating to
co-operative societies;
(j) a local authority;
(k) Central Government or a State Government;
(l) society as defined under the Societies Registration Act,
1860 (21 of 1860);
(m) trust; and
(n) every artificial juridical person, not falling within any of the
above;
Thus, from above sections, it is clear that an HUF is a recognized
entity under the GST law.
Q496. Explain GST on services by a Del Credere Agent (“DCA”) under
Circular No. 73/47/2018-GST, dated 5.11.2018.
Ans. Who is a DCA?
DCA is a selling agent who is engaged by a principal to assist in the
supply of goods or services by contacting potential buyers on behalf
of the principal. The factor that differentiates a DCA from other
agents is that the DCA guarantees the payment to the supplier. In
such scenarios where the buyer fails to make payment to the
principal by the due date, DCA makes the payment to the principal
on behalf of the buyer (effectively providing an insurance against
default by the buyer), and for this reason, the commission paid to
the DCA may be relatively higher than that paid to a normal
agent. In order to guarantee timely payment to the supplier, the DCA
can resort to various methods including extending short-term

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transaction-based loans to the buyer or paying the supplier himself

and recovering the amount from the buyer with some interest at a
later date
When will a DCA fall within the ambit of “Agent”?
In the case where the invoice for the supply of goods is issued by
the supplier to the customer, either himself or through DCA (invoice
is raised in the name of supplier), the DCA does not fall under the
ambit of the agent. However, where the invoice for supply of goods
is issued by the DCA in his name, the DCA would fall under the
ambit of agent
What are the activities connected to the DCA are there in a
transaction involving the Principal and customer/recipient?
• Supply of goods by the supplier (principal) to the DCA;
• A further supply of goods by the DCA to the recipient;
• Supply of agency services by the DCA to the supplier or the
recipient or both;
• Extension of credit by the DCA to the recipient.
What is the taxability of transactions performed by a DCA:
• When DCA issues the invoice for the supply of goods in his
name, the DCA would fall under the ambit of the agent and his
supply will be liable to GST and therefore, he will be responsible
to discharge the GST liability on the supply of goods made by
him.
• If DCA provides the temporary short-term transaction-based
credit to the buyer and also collects interest for such facility,
then the service of offering such facility is subsumed in the
supply of the goods by the DCA to the recipient.
• It is emphasised that the activity of extension of credit by the
DCA to the recipient would not be considered as a separate
supply as it is in the context of the supply of goods made by the
DCA to the recipient.
• Hence, it was clarified vide the said circular that, the value of
the interest charged for such credit would be required to be
included in the value of supply of goods by DCA to the recipient

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as per clause (d) of sub-section (2) of section 15 of the CGST

Act. This will have to be executed by the DCA by raising of debit
note referring to the actual invoice and applying the same rate
of tax as was applicable for the goods supplied.
Note:
o This is not to be seen as charging penal interest for the delay
in payment of consideration. It has to be viewed as extending
of a credit facility similar to what Credit Card agencies do.
o If the DCA does not fall within the ambit of “Agent”, then
interest charged by him will be exempted vide Sl. No. 27 of
NN 12/2017-CTR.
Q497. Who is liable to pay tax on the rental income from a commercial
property, which is deposited with the Court Receiver; where Tax
is deducted on such income and entry appears in Form 26 AS of
the landlord?
Ans. The similar issue has been discussed and concluded by the Hon’ble
Bombay High Court in the case of Bai Mamubai Trust v.
Suchitra (Order date: 13 Sep 2019) wherein it was held that
"where Section 92 of the CGST Act may apply, the agent of the
Court Receiver, wherever one is appointed, may be directed to pay
GST after obtaining registration on behalf of the Court Receiver or (if
permissible) under a pre-existing registration. In such a situation,
such payment will be made on behalf of the Court Receiver and
would discharge the Court Receiver's statutory obligations under
Section 92 of the Act".
Q498. What are the records to be maintained under GST in respect of
goods lost, stolen, etc.?
Ans. Section 35 of the CGST Act provides that every registered person
shall keep and maintain, at his principal place of business, as
mentioned in the certificate of registration, a true and correct
account of various documents/records specified thereunder.
Rule 56 of the CGST Rules provides that every registered person,
other than a person paying tax under section 10, shall maintain the
accounts of stock in respect of goods received and supplied by him,
and such accounts shall contain particulars of the opening balance,

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receipt, supply, goods lost, stolen, destroyed, written off or disposed

of by way of gift or free sample and the balance of stock including
raw materials, finished goods, scrap and wastage thereof.
Q499. What is the provision in case the recipient makes a delayed
payment of consideration for the supply of goods/services
rendered by the supplier? Are there any additional provisions
for late fee charged on delayed settlement?
Ans. As per second proviso to section 16(2) of CGST Act, where a
recipient fails to pay to the supplier of goods or services or both,
other than the supplies on which tax is payable on reverse charge
basis, the amount towards the value of supply along with tax
payable thereon within a period of 180 days from the date of issue of
invoice by the supplier, an amount equal to the ITC availed by the
recipient shall be added to his output tax liability, along with interest
thereon, in such manner as may be prescribed under rule 37 of the
CGST Rules.
Also that the recipient shall be entitled to avail credit of input tax on
payment made by him of the amount towards the value of supply of
goods or services or both along with tax payable thereon.
The recipient will be entitled to avail the credit again without
any time limit. In case part-payment has been made,
proportionate credit would be allowed.
Note: The supplier would not be subjected to additional burden
because of the late receipt of consideration for the supply made.
In case any additional fees or penalty is charged for late payment,
then as per section 12(6) of the CGST Act, the time of supply will be
the date on which the supplier receives the addition in value and as
per section 15(2) thereof, the additional fees is to be included in the
value of supply and hence, GST shall be charged at applicable
rates.
Q500. How can an auditor check whether payment is made within 180
days, if payments made are not linked with invoices? Should
this be done on FIFO basis and reported?
Ans. Compliance of payment to supplier within 180 days basically is on
the recipient. Also, he must furnish evidence to the auditor for such

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compliance. GST Auditor should check the evidence provided by the

recipient based on cross verification with payments and GST
returns. If payments are not linked with the Invoices, the auditor
shall raise the same with the recipient to provide the basis for such
compliance. Also, reconciliation of creditors account outstanding on
the year end and movement of such creditor balances through
ledger scrutiny can be a method to identify such non-compliances.
Q501. A private limited company is organising a conference and
charging fees from the participants. Whether it will be
considered as organisation of event or admission to event?
Ans. HSN 9996 on “Recreational, cultural and sporting services” deals
with admission to events; organising of events do not get covered
under this heading. HSN 998596 deals with “Events, Exhibitions,
Conventions and trade shows organisation and assistance services”.
The private limited company in question is organizing a conference
itself and admitting the participants. The company is not providing
services of organizing an event.
The difference between the two services are arranging the event for
self and collecting the amount from attendees and providing service
of arranging event for others. Therefore, looking at the provisions of
law and facts of the case it will be considered as admission to an
event.
Q502. Whether refund of tax paid on intra-State supply which is
subsequently held to be inter-State supply and vice versa can
be claimed? Whether such transaction can be rectified in GST
return?
Ans. CBIC vide Circular No 26/26/2017-GST dated 29.12.2017 has
prescribed the methodology for rectification of error in submission of
Form GSTR-3 and Form GSTR-1 return. Accordingly, liability which
was wrongly paid can be corrected in the return of the subsequent
month(s).
In the case of Bharti Airtel Ltd v. Union of India And Others
WP.(C) 6345/2018, CM Appl. 45505/2019, it was held that since
Government could not operationalize the statutory forms envisaged
under the Act, the benefit of rectification of errors must be allowed.

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Alternatively, refund of such tax can be claimed as per the

provisions of section 77 of the CGST Act read with rule 89(2) (j) of
the CGST Rules.
CBIC vide Circular No 125/44/2019-GST dated 18.11.2019 has
specified the procedure for claiming refund of tax paid under intra-
State instead of inter-State transaction or vice versa.
Q503. One business entity is registered in Gujarat and intends to buy
land to set up another factory in Maharashtra. Can the business
entity offer registration number of Gujarat for initial processing
charges?
Ans. GST is a consumption based tax in India. The ultimate benefit of tax
should flow to the State which is consuming the goods or services or
both. In case a business entity registered in Gujarat wants to offer
registration number of Gujarat for any initial charges to be incurred
in Maharashtra, it can do so, but, the actual consumption will be
done by Maharashtra State. Thus, the benefit of tax should flow
back to Maharashtra. Gujarat should bill for the initial processing
charges to Maharashtra.
But, in this specific case, initial processing charges relate to buying
of land (immovable property). As per section 12(3) (a) of the IGST
Act, the place of supply of services directly in relation to an
immovable property, including services provided by architects,
interior decorators, surveyors, engineers and other related experts
or estate agents, any service provided by way of grant of rights to
use immovable property or for carrying out or co-ordination of
construction work shall be the location at which immovable property
is located.
Thus, GST charged for initial processing charges to buy land by the
service provider located in Maharashtra will be CGST and
Maharashtra SGST. ITC of same will not be available even though
Gujarat GST registration is offered as tax charged is CGST and
Maharashtra SGST. Hence, no apparent benefit of giving the GST
number of the Gujarat State shall be allowed.

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Practical FAQ's under GST